Canada Dollar Trades at Almost 5-Year Low as U.S. Economy Surges

The Canadian dollar traded at almost a five-year low after a report showed the economy of the U.S., the nation’s biggest trade partner, surged the most in a decade in the third quarter, outpacing gains in Canada.

The loonie, as the Canadian dollar is known, fluctuated amid a rally in crude oil, the nation’s biggest export. The currency weakened earlier even after a report showed Canada’s gross domestic product grew 0.3 percent in October from a month earlier, more than forecast. The annualized 5 percent climb in U.S. GDP added to speculation the Federal Reserve will raise interest rates before the Bank of Canada.

“It really shows the U.S. diverging from other developed economies, like Europe and Canada,” Matt Weller, an analyst at Gain Capital Holdings Inc.’s in Grand Rapids, Michigan, said by phone. “It’s showing that the U.S. is pulling ahead of the pack.”

The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, depreciated as much as 0.3 percent to C$1.1667 per dollar before trading at C$1.1617 at 5 p.m. in Toronto, up 0.1 percent. It reached C$1.1674 on Dec. 15, the weakest level since July 2009. One loonie buys 86.08 U.S. cents.

The Bloomberg Dollar Spot Index, which tracks the greenback against the currencies of 10 U.S. trading partners including Canada, rose 0.5 percent to 1,133.13, the highest close since March 2009.

Bonds Fall

Canadian government 10-year bonds fell for the first time in three days, pushing yields up 11 basis points, or 0.11 percentage point, to 1.90 percent. They touched 1.92 percent, the highest since Dec. 8.

Economists surveyed by Bloomberg forecast Canada’s economy would grow 0.1 percent in October, after a 0.4 percent monthly gain in September. Canadian GDP expanded 2.3 percent from a year earlier, compared with a revised 2.4 percent the previous month and a forecast of 2.1 percent.

The U.S. economy’s gain from July through September compared with a Bloomberg survey’s forecast of 4.3 percent and a previous estimate of 3.9 percent.

The Fed signaled Dec. 17 it’s on course to raise U.S. borrowing costs in mid-2015 amid economic improvement. Bank of Canada Governor Stephen Poloz said earlier this month falling oil prices would damp growth and inflation.

Crude rose 2.5 percent to $56.62 a barrel in New York. The loonie weakened for the past four weeks as the commodity dropped, reaching a five-year low of $53.60 a barrel in New York on Dec. 16. It traded at $107.73 a barrel on June 20.

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