Canada Dollar Reaches 10-Week High Before Central Bank Meetings
Posted in Beavers by: adminCanada’s dollar touched the
strongest level in more than 10 weeks versus its U.S.
counterpart before a meeting where the Federal Reserve may
signal it will take further steps to bolster the economy of the
nation’s biggest trade partner.
The currency moved closer to parity with the greenback as
European stocks rose amid bets the European Central Bank may
undertake additional monetary stimulus at a meeting Aug. 2.
Officials said they’d do everything they could to support the
euro. Fed Chairman Ben S. Bernanke opens a two-day meeting
tomorrow. Canadian-dollar gains were tempered before a report
tomorrow that may show the nation’s economy expanded more slowly
in May than the previous month.
“Given the positive comments out of the ECB last week, the
market’s hoping that we get more good news this week,” Steve Butler, director of foreign-exchange trading in Toronto at Bank
of Nova Scotia’s Scotia Capital unit, said in a telephone
interview. “The market’s really leaning on getting a bit more
good news from either Bernanke or the ECB this week, and that’s
got the market feeling good about Canada.”
The Canadian currency, nicknamed the loonie, gained 0.2
percent to C$1.0016 per U.S. dollar at 5 p.m. in Toronto. It
touched C$1.0014, the strongest since May 15. One Canadian
dollar buys 99.84 U.S. cents.
The last time the two traded on a one-to-one basis was May
15, when the loonie touched 99.90 cents to the greenback.
Canada’s dollar has traded in 2012 as strong as 98.04 cents on
April 27 and as weak as C$1.0447 on June 4. Butler said he does
not expect the currency to trade below parity with the greenback
before the events of the week.
Monthly Gain
Canada’s dollar was poised for a monthly gain of 1.5
percent against the greenback. For the year, the Canadian
currency has strengthened 2 percent against the U.S. dollar.
The Stoxx Europe 600 Index climbed 1.6 percent. U.S. stocks
ended the day little changed after falling earlier on
speculation they rose too far, too fast last week. The Standard
Poor’s 500 Index lost as much as 0.3 percent.
Canadian government bonds rose, pushing the benchmark 10-
year yield down five basis points, or 0.05 percentage point, to
1.70 percent. The price of the 2.75 percent security due in June
2022 added 44 cents to C$109.50.
Slow Rise
The loonie will probably rise slowly against the greenback
after breaking through key support zones, according to JPMorgan
Chase Co. It may reach parity with its U.S. counterpart and
test support area at 99.50 U.S. cents, which represents the 76.4
percent retracement level from the pair’s April low.
“With short-term-momentum studies still oversold, the
downside bias will likely be a grind,” Niall O’Connor, a New
York-based technical analyst at JPMorgan, wrote in a note to
clients today.
Crude oil for September delivery fell as much as 0.9
percent to $89.33 a barrel in New York.
The Canadian dollar touched the weakest level in almost
five months versus its Australian counterpart. It dropped as
much as 0.3 percent to C$1.0553 per Aussie dollar, the lowest
since March 8.
“When markets move higher, in general, the Australian
dollar picks up more of those gains on a relative basis versus
the Canadian dollar,” Blake Jespersen, managing director of
foreign exchange in Toronto at Bank of Montreal, said in a
telephone interview. “The reason for that is that it’s tied to
a higher growth economy or part of the world, notably China,
whereas the Canadian dollar is tied more to U.S. growth.”
Canadian GDP
Canada’s gross domestic product, the value of all goods and
services produced, rose 0.2 percent in May from a month earlier,
when it gained 0.3 percent, according to the median estimate of
economists surveyed by Bloomberg News before Statistics Canada
reports the data tomorrow. The U.S. GDP slowed in the second
quarter to 1.5 percent, from 2 percent in the first quarter, the
government said last week.
“If this number does arrive on consensus you could speak
of slight contentment and a slightly stronger Canadian dollar
just because it will contrast notably with the U.S. GDP
figures,” said Eric Lascelles, chief economist at Royal Bank of
Canada’s RBC Global Asset Management until in Toronto, which
manages about $250 billion.
The pace of U.S. hiring in July probably failed to reduce
the 8.2 percent jobless rate in the country, economists in a
Bloomberg survey said before a report this week. Other U.S. data
may show manufacturing stagnated in July and consumer confidence
fell for a fifth month.
Fed Option
While the Fed refrained from introducing a third round of
asset purchases at its meeting last month, Fed Chairman Ben S.
Bernanke indicated that it’s a possibility. The central bank
purchased $2.3 trillion of securities from 2008 to 2011 in two
rounds of a stimulus strategy called quantitative easing.
“The bar has been set quite high here in terms of
expectations and lots of musings about the Fed, and generally
optimism has proven unwise when it comes to policy makers,”
Lascelles said. “I’m going to go out on a limb here and say
this week they may actually manage to deliver, and so we could
see the risk-on trade flourish and the Canadian dollar could be
along for the ride.”
To contact the reporter on this story:
Lindsey Rupp in New York at
lrupp2@bloomberg.net;
Ari Altstedter in Toronto at
aaltstedter@bloomberg.net
To contact the editor responsible for this story:
Robert Burgess at
bburgess@bloomberg.net
Article source: http://www.bloomberg.com/news/2012-07-30/canadian-dollar-falls-to-5-month-low-versus-australian-dollar.html