Canadian Dollar Increases Against U.S. as Crude Oil, Gold Rises
Nov. 27 (Bloomberg) — Canada’s dollar increased, extending gains from last week, as crude oil and gold prices advanced.
“Slightly firmer base metals prices, together with crude oil trading around $60 a barrel, should provide some support for the Canadian dollar,” said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.
The currency rose the most in two weeks on Nov. 24 after the Canadian Finance Ministry said it will post a surplus double the previous forecast. Investors sold the U.S. dollar on concerns the world’s largest economy was slowing.
Canada’s dollar rose to 88.28 U.S. cents at 11:43 a.m. in Toronto, from 88.13 U.S. cents on Nov. 24. One U.S. dollar buys C$1.1328.
Crude oil rose in New York on forecasts that most of the U.S. will be colder than normal next week and on a report that Saudi Arabia’s oil minister said OPEC may cut output at a meeting next month.
Crude oil for January delivery rose 49 cents, or 0.83 percent, to $59.73 a barrel on the New York Mercantile Exchange. Prices are up 4.1 percent from a year ago.
The Canadian dollar tends to follow the price of commodities, which account for about 54 percent of the nation’s exports and 12 percent of its C$1.09 trillion economy.
Traders said the Canadian dollar is weakening against European currencies because a slowdown in the U.S. may also hurt Canada, which ships more than 80 percent of its exports to the U.S. The Canadian dollar touched an almost-15-month low against the euro today, when it traded at 67.41 euros, the lowest since September 2005.
‘The Same Brush’
“You still have the Canadian dollar being painted with the same brush as the U.S. dollar,” said Jonathan Gencher, vice president of foreign exchange sales at BMO Capital Markets in Toronto. “Canada still wants to lag against the euro.”
Canada’s economic growth will dip to 2.5 percent next year from 2.8 percent this year and return to 2.8 percent in 2008, according to the Bank of Canada’s Oct. 19 monetary policy report.
The central bank kept its key interest rate unchanged at 4.25 percent for the third-straight meeting on Oct. 17, after seven consecutive increases from September 2005 to May.
The 12-nation euro extended gains before reports this week that will probably show faster inflation, prompting traders to bet the European Central Bank will lift rates at least twice more. French Finance Minister Thierry Breton said European finance ministers will discuss the euro’s 10.8 percent gain versus the U.S. dollar this year at meetings today and tomorrow.
The yield on Canada’s benchmark 10-year note was little changed at 3.96 percent. The price of the 4 percent security maturing in June 2016 rose 1 cent to C$100.29. Bond yields move inversely to prices.
Canadian 10-year government bonds yielded about 59.75 basis points less than comparable-maturity U.S. Treasuries. The difference was 77 basis points in May, the largest this year.