Canadian Dollar Reaches a 10-Month High Even as Economy Slowsby
Currency is 2nd best performer among G-10 peers this year
Growth may have stalled in February on mining, oil and gas
The Canadian dollar reached the strongest level since June even as a report showed the nation’s economy contracted in February.
The loonie headed for its fifth-straight weekly advance on gains in crude oil, until last year the nation’s largest export. Canada’s gross domestic product declined for the first time in five months, a rare setback in a quarter economists expect will show the best expansion in more than a year.
“The market reaction, if there is one, is lower, which tells you the market still wanted to attack and take out C$1.25,” said Greg Anderson, the global head of foreign-exchange strategy in New York at BMO Capital Markets Corp. “This is probably the top” of the Canadian dollar rally as the Federal Reserve will probably increase interest rates in June or July, while the crude-oil rebound is closing out, he said.
With a 10.6 percent gain this year, the Canadian currency has been the best performer among G-10 peers after the yen. It recovered from a slide to a 13-year low against the U.S. dollar in January, benefiting from signs of improvement in Canada’s economy and a rally in oil.
The loonie rose 0.3 percent to C$1.2518 per U.S. dollar at 9:53 a.m. in Toronto . One loonie buys 79.89 U.S. cents. Crude oil futures added 1.4 percent to $46.68 a barrel in New York.
The 0.1 percent GDP contraction was smaller than the 0.2 percent median estimate in a Bloomberg News survey of economists. The agency also kept in place its January growth estimate of 0.6 percent, which was the fastest since 2013.
Hedge funds and other large speculators have started betting in the Canadian dollar’s favor this month, ending their longest sustained bearish stance since 2001, according to data from the Commodity Futures Trading Commission. Bulls outnumbered the bears for three weeks in a row, the data show.
The loonie will weaken to C$1.33 per U.S. dollar by the end of the year, forecasts compiled by Bloomberg show.