Canada’s dollar touched a level beyond parity with its U.S. counterpart for a third consecutive day on speculation the global economic recovery will strengthen in 2011, making growth-linked currencies more attractive.
The loonie, as the currency is nicknamed, has gained 3 percent in 2010, the sixth-best performance in a measure of 10 developed-nation currencies, Bloomberg Correlation-Weighted Currency Indexes showed. Australia’s dollar rose 12 percent, while the U.S. dollar fell 2.8 percent. U.S. businesses unexpectedly expanded in December at the fastest pace in 22 years, data showed.
“The pick-up in the U.S. economy will be a benefit to our domestic economy,” Steve Butler, director of foreign-exchange trading in Toronto at Bank of Nova Scotia’s Scotia Capital unit, said via e-mail. “We’ve been stuck essentially in a 20-point range for two days now. I expect it to break once we get into the new year.”
The Canadian currency rose 0.1 percent to C$1 per U.S. dollar at 5 p.m. in Toronto, compared with C$1.0009 yesterday. It gained as much as 0.2 percent to 99.91 cents per U.S. dollar.
The loonie remained stronger as data showed first-time claims for unemployment benefits in the U.S., Canada’s biggest trade partner, declined to the lowest level since July 2008 and a gauge of U.S. business unexpectedly climbed.
The claims decreased by 34,000 to 388,000 in the week ended Dec. 25, Labor Department figures showed today in Washington.
Highest Since 1988
The Institute for Supply Management-Chicago Inc. said its business barometer rose to 68.6 this month, the highest level since July 1988, from 62.5 in November. The median forecast in a Bloomberg survey was for a drop to 61.
Italian business confidence rose this month to the highest in almost three years, Isae institute date showed, helping to boost demand for currencies that benefit from global growth.
“The economic optimism going into the calendar year-end and beyond will likely contribute to more risk-related activity in currency markets, which should benefit the Canadian dollar,” Jack Spitz, managing director of foreign exchange at National Bank of Canada, said by phone from Toronto.
Canada’s currency fell against 11 of its 16 most-traded peers today, sliding the most against Brazil’s real while appreciating the most versus the pound. The loonie has risen 2.6 percent in December versus the greenback. It has gained the most this month versus the pound, 3.4 percent, and fallen the most against the Swiss franc, 4.5 percent.
2010 Performance
For the year, the Canadian dollar, called the loonie for the image of the aquatic bird on the C$1 coin, has strengthened against seven of its major counterparts. It advanced the most against the Danish krone, 12 percent, and fell the most versus the yen, 8.4 percent.
The loonie will trade at parity with its U.S. counterpart at the end of March, weaken to $1.01 per greenback by June, and end 2011 at parity, according to the median forecast in a Bloomberg survey of 29 economists and analysts.
Government bonds were little changed today. The two-year note yielded 1.70 percent after reaching 1.77 percent yesterday, the highest level since July 9. The 1.5 percent security due in December 2012 slipped one cent to C$99.63. A basis point is 0.01 percentage point. The 10-year note yielded 3.15 percent.
Canada’s government bonds have returned 5.9 percent in 2010, after losing 1.5 percent last year, according to a Bank of America Merrill Lynch index. The securities gained 12 percent in 2008. Global sovereign bonds are up 3.5 percent this year, according to a separate Merrill Lynch index.
Canadian corporate debt has returned 7.1 percent this year, and provincial bonds have gained 7 percent.
Crude oil for February delivery traded at $89.43 a barrel in New York, down 1.9 percent. It rose to $91.88 on Dec. 27, the highest level since Oct. 7, 2008. Canada is the largest supplier of crude to the U.S.
Source: www.bloomberg.com
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