Canada's dollar fell for the first time in three days, weakening to within one cent of parity with its U.S. counterpart, as oil and copper dropped on speculation a global slowdown will hamper demand for raw materials.
The Canadian currency extended its loss versus the greenback as the euro erased gains after an Austrian parliamentary committee delayed a vote on an increase in Europe's bailout program, fueling speculation the region’s debt crisis will worsen.
“It’s not a promising sign,” John Curran, a senior vice president at CanadianForex Ltd., an online foreign-exchange dealer, said by phone from Toronto. “It should promote risk aversion. There’s a slight move toward purchasing U.S. dollars across the board.”
The Canadian dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, depreciated 0.6 percent to 99.14 cents per U.S. dollarat 1:36 p.m. in Toronto, compared with 98.57 cents yesterday. It weakened as much as 0.8 percent to 99.40 cents. It traded at C$1.0027 two days ago, the lowest since Jan. 31. One Canadian dollar buys $1.0087.
“I don’t know why the Canadian dollar is stronger than par,” Curran said. “All we have to do is chew through some resting orders in corporate Canada and other interested parties up around that level. Once we break there, we’re off to the races, and C$1.03 is our target.”
The greenback pared losses against the euro after the Austrian parliament’s finance committee rejected adding an overhaul of the European Financial Stability Facility to the agenda of a meeting today.
Austria’s parliament will now call a special meeting for the finance committee that will have the item on the agenda, according to Harald Waiglein, a spokesman for the ministry. The date could still be in September, he said.
The government drew an average yield of 0.954 percent today at its auction of C$3.5 billion ($3.53 billion) of two-year notes. The 1.5 percent securities due in November 2013 attracted $8.86 billion in bids, according to a statement on the Bank of Canada’s website.
Canada’s currency fell versus nine of its 16 most-traded counterparts as crude oil, the nation’s biggest export, dropped to $88.80 a barrel in New York from yesterday’s one-month high of $90.52, and copper slid 1.6 percent to $8,630 a metric ton. Zinc, lead and tin also declined.
The loonie gained 1.8 percent over the past week against nine other developed-nation currencies traded by Bloomberg Correlation-Weighted Currency Indexes. The greenback rose 2.7 percent. The U.S. is Canada’s biggest trade partner.
The Asian Development Bank cut its growth forecast for its region, dimming the prospects for raw materials, which account for about half of Canada’s export revenue.
The loonie’s one-month correlation coefficient with crude reached 0.82 today, approaching the reading of 0.88 it touched in November 2009, which was the highest in at least a decade, Bloomberg data show. A reading of 1 indicates the measures move in lockstep.
“It’s most likely to be a buy-on-dips mentality that will prevail as far as dollar-Canada is concerned,” Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce, said by phone from London. “There’s still huge amounts of uncertainty out there.”