Canada’s Dollar Climbs as Crude Oil Rises, Global Stocks Gain
By Chris Fournier
Dec. 10 (Bloomberg) — Canada’s dollar rose against its U.S. counterpart as crude oil advanced and global stocks gained, increasing the currency’s appeal.
“Crude’s up, and that’s going to underpin the Canadian dollar,” said Jack Spitz, Toronto-based managing director of foreign exchange at National Bank of Canada, which predicts the currency will strengthen to C$1.22 by year-end.
The Canadian dollar increased 0.3 percent to C$1.2583 per U.S. dollar at 4:51 p.m. in Toronto, compared with C$1.2626 yesterday. One Canadian dollar buys 79.47 U.S. cents. The loonie briefly erased its advance as U.S. stock markets swung between gains and losses.
Crude oil futures for January delivery rose as much as 9.8 percent to $46.17 a barrel in New York. Oil accounts for 21 percent of the Bank of Canada’s Commodity Price Index, the largest component.
The Canadian dollar tends to rise 0.3 cents for every $1 gain in the price of the commodity, according to a recent study by TD Securities Inc., a unit of Canada’s second-largest bank.
After climbing 17 percent in 2007, Canada’s dollar has depreciated 21 percent this year. Prices of commodities, which generate about half of Canada’s export revenue, have plummeted as a global recession reduced demand.
The Canadian dollar may recover some of its recent losses, according to CIBC World Markets analysts Shane Enright in Toronto and Adam Fazio in New York.
“While we maintain a medium-term bullish view on the U.S. dollar, we hold a bias for modest Canadian dollar strength over the remainder of the week,” the analysts wrote in a note today. The loonie may appreciate to C$1.2225 before weakening to C$1.30 in early 2009, according to CIBC.
Labor Productivity
Labor productivity was unchanged in the third quarter, Statistics Canada said today. The measure hasn’t increased since the first quarter of 2007, the longest stretch in 27 years. The median forecast of 12 economists surveyed by Bloomberg News was for a 0.2 percent increase.
Canada’s trade surplus fell to C$3.3 billion in October, from C$4.5 billion in the prior month, according to the median forecast of 21 economists in a Bloomberg News survey. Ottawa- based Statistics Canada will release the report tomorrow at 8:30 a.m. Toronto time.
“The moderation in the Canadian trade surplus is expected to continue,” Eric Lascelles, Toronto-based chief economics strategist at TD Securities, wrote in a report today, citing the “prolonged and deep recession” in the U.S. and “global commodity prices falling like a stone on softening demand.”
The yield on the two-year government bond fell one basis point, or 0.01 percentage point, to 1.52 percent. The yield touched 1.466 percent on Dec. 5, the lowest since Bloomberg began compiling the data in 1989. The price of the 2.75 percent security due in December 2010 rose 2 cents to C$102.37.
To contact the reporter on this story: Chris Fournier in Montreal atcfournier3@bloomberg.net
Last Updated: December 10, 2008 16:54 EST