Canada Dollar Declines Along With Oil as Risk Appetite DropsAri Altstedter
The Canadian dollar declined for the first time in three days versus its U.S counterpart as crude oil, the nation’s largest export, and stocks dropped amid a decrease in investor appetite for risk.
The currency briefly pared the decline as a report showed Canada’s gross domestic product grew at a 2.5 percent annualized pace from January to March, the fastest in six quarters, after a revised 0.9 percent gain in the fourth quarter, Statistics Canada said from Ottawa. Canada’s dollar retreated again as gold tumbled, leading commodities lower.
“The realization that reports are coming out that the Canadian economy is probably not going to carry on at that pace, some of that enthusiasm for the GDP numbers faded and the attention turned to the commodity story,” said Emanuella Enenajor, an economist at CIBC World Markets, by phone from Toronto. “The market is reacting to that,”
The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, fell 0.8 percent to C$1.0375 per U.S. dollar at 5 p.m. in Toronto. One loonie buys 96.39 U.S. cents.
The loss extended the loonie’s monthly decline versus the greenback to 3 percent, the most since February.
Crude-oil futures fell 2.2 percent to $91.60 a barrel in New York. The Standard & Poor’s GSCI index of 24 commodities fell 1.1 percent while gold futures fell 1.7 percent to $1.387.60 per ounce at the Comex in New York. The S&P 500 Index of stocks dropped 1.4 percent.
Canada’s benchmark 10-year government bond yields were little changed at 2.06 percent. The 1.5 percent security maturing in June 2023 traded at $94.96.
Canada’s economic growth was led by exports in the first quarter while domestic spending slowed.
Crude-oil export volumes jumped 8.2 percent to a record in the first quarter on a non-annualized basis, while natural gas exports were up 9.7 percent over the period, according to Statistics Canada data.
Final domestic demand -- an aggregate of consumption, government spending and business investment -- rose at a 0.6 percent annualized pace in the first quarter, the slowest since the first quarter of 2009, while household consumption grew at an annualized 0.9 percent in the final three months of 2012.
“The markets in general have been very unsettled for several days now, and the details of the GDP report were very mixed,” said Nick Bennenbroek, the head currency strategist at Wells Fargo & Co. in New York, said in a telephone from New York. “When you combine those two uncertain factors together, you’re getting an uncertain reactions in terms of the currency.”
The loonie gained against the dollars of Australia and New Zealand, two fellow commodities exporters, as business activity in the U.S. rebounded in May to the highest level in a year. The MNI Chicago Report’s business barometer rose to 58.7, its highest level since March 2012, from 49 in April.
“Canada might not keep up with the pace of U.S. expansion, but it’s still going to benefit,” David Bradley, director of foreign-exchange trading at Bank of Nova Scotia’s Scotia Capital Inc., said by phone from Toronto.
Canada’s currency was little changed in the past month against nine other developed-nation currencies tracked by the Bloomberg Correlation Weighted Index. The U.S. dollar added 3.3 percent while the euro gained 1.8 percent. The currencies of Australia and New Zealand fell 5.5 percent and 5 percent to lead decliners.