Canadian Dollar Ends Longest Winning Streak in 3 Months on Greece Turmoil
The Canadian dollar fell against its U.S. counterpart, breaking its longest stretch of weekly gains since October, as turmoil over a second international bailout for Greece damped investor appetite for riskier assets.
The currency weakened the most in a month yesterday even after Canada recorded its widest trade surplus since 2008. The Canadian dollar ended four days of trading within a 1-cent range after European officials demanded Greece enact greater austerity measures before winning aid needed to avert economic collapse. Canadian consumer prices held steady last month, data next week is forecast to show.
“The Canadian dollar will largely move in lockstep with risk sentiment next week,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “Any constructive news on Greece will tend to bode better for the growth-reliant currency.”
Canada’s currency, nicknamed the loonie for the image of the bird on the C$1 coin, fell 0.8 percent to C$1.0014 per U.S. dollar yesterday in Toronto, from 99.34 Canadian cents on Feb. 3. That ended four weeks of gains, the longest weekly winning streak since Oct. 28. The loonie slid yesterday as much as 0.9 percent, the biggest intraday drop since Jan. 5. One Canadian dollar purchases 99.86 U.S. cents.
The loonie touched 99.26 cents Feb. 9, the strongest level since Oct. 31, after data showed initial claims for unemployment benefits in the U.S. unexpectedly fell last week. Its weakest level since Feb. 3 was 99.95 cents until it sank yesterday as risk appetite faded.
‘Narrow Range’
“The U.S. and Canadian dollars had settled in a fairly narrow range on steady signs of improvement for the U.S. economy,” Manimbo said.
Implied volatility for one-month options on the Canadian dollar versus the greenback touched a 10-month low yesterday before paring its decline as the loonie weakened. It reached 7.66 percent, the lowest level since April 11, before rising to 8.08 percent. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency. It averaged 10 percent over the past year.
Canada’s government bonds fell for a second week, pushing the yield on the benchmark 10-year note up four basis points, or 0.04 percentage point, to 2.05 percent. It touched 2.13 percent on Feb. 9, the highest level since Dec. 7. The price of the 3.25 percent security due in June 2021 dropped 36 cents to C$110.10.
Debt Auction
Five-year note yields increased five basis to 1.41 percent. The government will auction on Feb. 15 C$3.5 billion ($3.5 billion) of 1.5 percent securities due in March 2017, according to a statement on the Bank of Canada’s website.
Stocks and commodities tumbled yesterday, erasing five-day gains. The Standard & Poor’s 500 Index fell for the first week this year, slipping 0.2 percent. The Thomson Reuters/Jefferies CRB Index (CRY) of commodities slid 0.7 percent. Raw materials account for about half of Canada’s export revenue.
The loonie stayed lower yesterday as Statistics Canada data showed a trade surplus of C$2.7 billion in December. The figure beat all 19 forecasts in a Bloomberg economist survey with a median projection for a surplus of C$800 million.
Canada’s consumer price index increased 2.3 percent in January from a year earlier, the same as the previous month, economists in a Bloomberg News survey forecast before the nation’s statistics agency reports the data Feb. 17. Inflation had slowed in December from 2.9 percent the previous month.
The projection suggested the Bank of Canada won’t raise its benchmark interest rate soon from 1 percent, where it’s been since September 2010. Growth in Canada and the U.S. will be “more modest” than forecast last year as European leaders struggle to contain their debt crisis, the Ottawa-based bank said Jan. 17 in a statement after its last policy meeting.
‘Back Seat’
“Some of the data is going to take a back seat to Europe,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “We aren’t really expecting anything to sway the stance of the Bank of Canada.”
The loonie dropped yesterday as Greece’s bailout threatened to unravel amid discord after Luxembourg Prime Minister Jean- Claude Juncker, head of euro-region finance chiefs, said Greece must turn into law budget cuts it pledged. A 130 billion-euro ($172 billion) aid package won’t be forthcoming until it does, he said. Europe’s debt crisis began in Greece in 2009.
Greek Prime Minister Lucas Papademos won approval from his cabinet late yesterday for deeper budget cuts, said a government official who declined to be named. The prospect of more austerity had spurred protests and a strike. The bill detailing the measures now goes to Parliament.
The Canadian dollar gained 1.4 percent over the past three months against nine developed-nation counterparts monitored by Bloomberg Correlation-Weighted Currency Indexes. The U.S. dollar fell 0.4 percent, and the euro dropped 3.7 percent.
To contact the reporter on this story: Austen Sherman in New York at asherman18@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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