Canada’s dollar rose for the first time in three days as an advance in U.S. equities and crude oil, the nation’s biggest export, encouraged demand for assets related to economic growth.
The Canadian currency was the biggest winner versus the U.S. dollar among the 16 most-traded counterparts of the greenback tracked by Bloomberg. The currencies of rival commodity producers Australia and New Zealand also advanced, while the euro fell on concern Irish banks will need a bailout from the European Union.
“Investors are adding a touch of risk this morning with the rise in stocks and oil,” said John Curran, a senior vice president at CanadianForex Ltd., an online foreign-exchange dealer in Toronto. “Still, market sentiment is mixed, so while the loonie will follow commodities and stocks right now, the real concern is Europe, and the loonie should follow market events.”
Canada’s currency, known as the loonie for the image of the aquatic bird on the C$1 coin, appreciated 0.5 percent to C$1.0074 per U.S. dollar at 10:27 a.m. in Toronto, from C$1.0123 on Nov. 12. One Canadian dollar buys 99.27 U.S. cents. The currency touched parity Nov. 5-11.
The loonie gained 1 percent to C$1.3727 versus the euro as European Central Bank Vice President Vitor Constancio said Ireland would be able to tap the European Union’s rescue fund to bail out its banks.
Drop in Bonds
Canadian government bonds fell, pushing the yield on the 10-year security up as much as eight basis points, or 0.08 percentage point, to 3.10 percent, the highest level since Aug. 6. The price of the 3.5 percent security maturing in June 2020 dropped 44 cents to C$103.57.
The 10-year bond yield will fall to 2.83 percent by year- end, according to the median of estimates from economists gathered Nov. 4-11. The previous survey called for a 3 percent yield by the end of the year.
The Bank of Canada refrained from raising its policy rate on Oct. 19 after three prior increases to 1 percent. Policy makers won’t boost borrowing costs again until the April-June period, according to the survey.
Investors are betting the central bank will keep interest rates unchanged until mid-2011. The rate on the six-month overnight index swap was 1.10 percent on Nov. 12, and the nine- month rate was 1.17 percent. Investors are also betting 10-year bond yields will be 3.13 percent in December, according to futures contract trading on the Montreal Exchange on Nov. 12.
The Canadian dollar gained as crude oil for December delivery increased as much as 1.1 percent to $85.77 a barrel. The Standard & Poor's 500 Index rose 0.3 percent, while the S&P/TSX Composite Index fell 0.1 percent.
Retail sales in the U.S., Canada’s biggest trading partner, climbed in October by the most in seven months, a report from the U.S. Commerce Department showed. Purchases rose 1.2 percent after a 0.7 percent increase in September that was larger than previously estimated.