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The Canadian dollar gained the most in almost a year versus its U.S. peer as Bank of Canada Governor Stephen Poloz in his first public comments reiterated his predecessor’s view that rates will rise as the economy grows.
The currency briefly weakened before extending gains as Poloz, who took office on June 3, said he expects a recovery in foreign demand to boost exports. He added that he won’t give “running commentary” on whether the nation’s currency is overvalued. The unemployment rates in Canada and the U.S. are forecast to remain unchanged when they are reported tomorrow.
“Poloz showed no willingness to take action to weaken the Canadian dollar,” Adam Button, a currency analyst at Forexlive.com in Montreal, said in a telephone interview. “The traders who piled into U.S. dollar longs over the last month are getting absolutely mangled.” A long position is a bet an asset will increase in value.
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.8 percent to C$1.0264 per U.S. dollar at 5 p.m. in Toronto after strengthening as much as 1.4 percent, the most since June 29, 2012. One loonie buys 97.39 U.S. cents.
The currency touched C$1.0199, crossing the 200-day moving average of C$1.0204, considered by some traders a measure of momentum.
Oil, Bonds
Crude-oil futures rose 1.1 percent to $94.76 a barrel in New York and the Standard & Poor’s GSCI index of 24 commodities gained 0.3 percent. The S&P 500 Index of stocks added 0.9 percent.
‘Jumpier Markets’
Former Governor Mark Carney, who left June 1 to head the Bank of England, kept the key interest rate at 1 percent for the 22nd consecutive meeting on May 29. Poloz will probably maintain Carney’s no-change policy for at least the rest of the year.
Risk Reversals
The one-month so-called 25-delta risk reversal rate fell to 1.0750, its lowest level since May 13. Risk reversals measure the premium on options contracts to sell Canadian dollars versus buying U.S. contracts that do the opposite.
Hedge funds and other large speculators last week decreased their bets the Canadian dollar will decline against the greenback, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 33,359 on May 28, compared with net shorts of 33,852 a week earlier.
Canada’s currency has fallen 1.8 percent in the past month against nine developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. (SPX) The greenback added 0.6 percent, while the Aussie dollar led decliners, dropping 5.9 percent.
