The Canadian dollar advanced for the first time in three days against its U.S. counterpart as commodities and stocks rallied on positive risk sentiment and Canada’s trade deficit narrowed.
The loonie, as the currency is nicknamed for the image of the waterfowl on the C$1 coin, rose against the majority of its 16 most-traded peers as U.S. shares climbed for the first time in five days amid strong demand at an Italian debt sale. Government bonds declined as applications for U.S. jobless benefits dropped.
“There’s overall positive risk sentiment in the market today that’s pulled the Canadian dollar up with it,” Blake Jespersen, managing director of foreign exchange at Bank of Montreal (BMO), said in a phone interview from Toronto. “We’ve seen a fair rally in the euro overnight, oil pricesare rising, and equity markets are off to a good start.”
Canada’s currency added 0.4 percent to 97.75 cents per U.S. dollar at 10:22 a.m. in Toronto after rising as much as 0.6 percent, the most this week. One Canadian dollar buys $1.0230.
Crude oil, Canada’s largest export, gained 1.6 percent and the Standard & Poor’s GSCI Index (SPX) of 24 raw materials advanced 1.1 percent. The Standard & Poor’s 500 Index added 0.7 percent, snapping four days of losses.
Canadian government bonds declined, with the yield on the benchmark 10-year note adding four basis points, or 0.04 percentage point, to 1.83 percent. The price of the 2.75 percent note maturing in June 2022 lost 31 cents to C$108.13.
Trade Deficit
The Canadian merchandise trade deficit narrowed in August more than economic forecasts on the steepest decline in imports in more than three years. The deficit of C$1.32 billion ($1.35 billion) followed a revised shortfall of C$2.53 billion in July, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg had forecast a C$1.9 billion deficit, based on the median of 21 forecasts.
Sluggish exports have helped keep Canada’s economic growth rate below 2 percent in the first two quarters of this year.
The Bank of Canada sold C$2.7 billion ($2.8 billion) in three-year bonds yesterday, with an average yield of 1.282 percent. The total bid was C$7.87 billion, for a bid-to-cover ratio of 2.92, measuring the level of bids versus the amount of debt for sale.
The Rome-based Treasury sold 3.75 billion euros ($4.8 billion) of its benchmark three-year bond to yield 2.86 percent, more than the 2.75 percent at the last auction of the same securities on Sept. 13. Investors bid for 1.67 times the amount offered, up from 1.49 times last month, indicating investors are still willing to invest in the country.
U.S. Claims
U.S. jobless claims fell more than forecast by economists to a four-year low last week, reflecting a healing labor market in Canada’s largest trading partner. Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008, Labor Department figures showed today. A Bloomberg survey forecast 370,000 claims.
The loonie has gained 2.6 percent this year, the third most among 10 industrial-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar declined 2.2 percent and the yen slipped 4.5 percent, the most among decliners. New Zealand’s dollar rose 3.4 percent to lead gainers.
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