The Canadian currency fell as much as 1 percent as North American equities dropped, making higher-yielding assets less attractive to investors. The nation’s employers added 20,000 jobs in December after net losses in the previous two months, according to economists before tomorrow’s jobs report.
“The main trade continues to be sell euro-dollar, and people are looking for themes to do it,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA, said by phone from London, citing local-government financing in Spain. Rising volatility in European equities is “helping to trigger some risk-off signals across the board, and the Canadian dollar is suffering as a consequence,” he said.
The currency, also known as the loonie, depreciated 0.6 percent to C$1.0189 per U.S. dollar at 12:23 p.m. Toronto time. One Canadian dollar buys 98.15 U.S. cents. It touched C$1.0226, the weakest level since Dec. 29.
Futures on crude oil, Canada’s largest export, dropped 0.5 percent to $102.80 a barrel in New York. Canada derives about half of its export revenue from the sale of raw materials, including crude. The Standard & Poor’s 500 Index decreased 0.2 percent, while the S&P/TSX Composite Index slid 0.2 percent.
Canada’s currency briefly pared losses after Statistics Canada reported that industrial product prices unexpectedly rose 0.2 percent in November and factory raw-material prices advanced 3.8 percent, more than seven times the median forecast of 11 economists in a Bloomberg News survey.
The Ivey purchasing managers’ index rose to 63.5 in December on a seasonally adjusted basis, following a November reading of 59.9, the University of Western Ontario business school said today. The reading is a seven-month high. Readings of more than 50 indicate purchasing by governments and companies advanced. The index’s employment measure rose in December to 60, the highest since February, from 49.4 in the prior month.
Employers probably added 20,000 jobs in December, according to the median of 24 forecasts in a Bloomberg News survey. Statistics Canada is due to release the data tomorrow in Ottawa.
Two-year Canadian government bond yields dropped two basis points, or 0.02 percentage point, to 0.95 percent. The difference in yield with equivalent-maturity U.S. Treasuries narrowed to 70 basis points, the smallest spread in a week.
Investors should purchase the Canadian dollar against the yen because the Japanese currency may weaken as “concern grows about how strong it is overall,” said Kit Juckes, head of foreign-exchange research at Societe Generale SA, in an e-mail message. “Speculation of intervention will resurface, and while 2012 may be a repeat of 2011 in the sense that a low-yield world is not compatible with a much weaker yen, January can see the yen soften.”
Central banks and governments intervene by arranging purchases or sales of currencies to influence the exchange rate.
The loonie was little changed at 75.62 yen today after earlier falling 0.5 percent. It dropped on Oct. 4 to 72.16 yen, the lowest level since February 2009.
The Canadian currency also briefly pared its drop versus the greenback after a report from Roseland, New Jersey-based ADP Employer Services showed stronger-than-forecast growth in America’s company employment last month.
“The U.S. economy is stabilizing and showing signs of tepid growth,” said Firas Askari, head of currency trading at Bank of Montreal’s BMO Capital Markets in Toronto, in an e-mail message. “That’s good for Canada and the loonie overall. Europe is still a traffic accident in slow motion.”
Outlook for Loonie
Askari predicted the Canadian dollar will trade in a range of C$1.0050 and C$1.0400 over the next six weeks.
France sold 7.96 billion euros ($10.2 billion) of debt, with 10-year borrowing costs rising in the country’s first bond auction of the year as credit-rating companies threaten to cut the nation’s AAA grade.
Canada ships about three quarters of its exports to the U.S. and is that country’s biggest supplier of crude oil.
With gains of 1.6 percent over the past month, Canada’s currency is the fifth-best performer after the yen, the greenback and the dollars of Australia and New Zealand among 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The loonie is the worst performer over 12 months, having dropped 3.1 percent.