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Canada's dollar reached a four-day high after a report showed gross domestic product soared at the most rapid pace in two years in July, providing more to evidence the nation’s economy is bouncing back from a second-quarter slowdown.
The currency powered up against its U.S. counterpart as Canadian consumer sentiment jumped to the peak in more than two years as employment bolster and the country’s housing market remained buoyant, according to the new Bloomberg Nanos Canadian Confidence Index.
Canadian Data
Statistics Canada said output surged 0.6 percent to an annualized C$1.58 trillion ($1.54 trillion), the biggest gain since July 2011. GDP fell 0.5 percent in June, the largest pullback since the 2009 recession. The median forecast in a Bloomberg economist survey was for 0.5 percent growth in July.
Option Volatility
Implied volatility for one-year options on the Canadian dollar versus its U.S. counterpart reached 7.13 percent today, the highest since Sept. 17. Implied volatility is used to set option prices and gauge the expected pace of currency swings. The average for this year is 7.39 percent.
Futures traders decreased their bets the Canadian dollar will fall against its U.S. peer for a third straight week, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the loonie versus those on a gain, known as net shorts, was 5,675 on Sept. 24, compared with 18,764 a week earlier.
The one-year so-called 25-delta risk-reversal rate, which measures the premium charged for the right to buy the U.S. dollar against its Canadian counterpart versus contracts to sell, rose to 1.73 percent, the highest in more than three weeks. The 2013 average is 1.56 percent.
Trading in over-the-counter options for the U.S. dollar-Canadian dollar pair amounted to $1.5 billion, making up 7.6 percent of the $19.7 billion daily total. Greenback-loonie trading was 279 percent more than the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis.
The loonie sagged down 3.3 percent in the past year versus nine other developed-nation currencies tracked by the Bloomberg Correlation-Weighted Index. The yen relinquished 21 percent, and the Australian dollar backed down 9.2 percent. The U.S. dollar powered 2.1 percent higher.
