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The Canadian dollar recorded its largest decline in more than two months against its U.S. counterpart after Federal Reserve Chairman Ben S. Bernanke said financial stimulus that involves printing the U.S. currency could slow this year.
Bonds, Oil
Canada’s benchmark 10-year government bonds fell, with yields rising seven basis points, or 0.07 percentage point, to 2.32 percent after touching 2.36 percent, the highest since October 2011. The 1.5 percent security maturing in June 2023 lost 62 cents to C$92.73.
Stability, Patience
Canada’s deficit was C$14.1 billion (C$13.6 billion) from January to March, Statistics Canada reported, from a revised C$14.6 billion in the previous quarter.
Loonie ‘Crossfire’
The Bank of Canada is alone in the Group of Seven in signaling that its next move may be raise interest rates and economists are anticipating Poloz won’t tighten policy until the end of next year at the earliest, in part to avoid a strengthening of the Canadian dollar that could undermine business confidence and exports.
“This is really a U.S. dollar move, so it would be wrong to characterize it as a Canada bear market,” Adam Cole, head of Group of 10 currency strategy at Royal Bank of Canada, said by phone from London. “We are still negative, and I do still think we’ll make new highs for dollar/Canada, and that will be a Canadian dollar story going forward. But, at the moment, Canada is really just caught in the crossfire.”
The Canadian dollar erased an earlier gain and is little changed in the past week against nine developed nation currencies tracked by the Bloomberg Correlation Weighted Index. Norway’s krone fell 2.9 percent to lead decliners, while the U.S. dollar paced gainers with a 2.4 percent rise.
