Canada’s Dollar Appreciates for Second Day as Stocks, Oil Climb
By Chris Fournier
Nov. 24 (Bloomberg) -- Canada’s currency strengthened for a second day after global stocks gained, buoyed by a bailout of Citigroup Inc. and speculation that governments will stimulate faltering economies.
“The stock market obviously likes the Citibank bailout,” said Aaron Fennell, a Toronto-based futures and currency broker at MF Global Canada Co., a unit of MF Global Ltd., the world’s largest broker of exchange-traded futures and options. “The stock market is up, which gives the impression that the U.S. economy is a bit stronger and boosts the Canadian dollar.”
The Canadian dollar appreciated as much as 3.1 percent to C$1.2286 per U.S. dollar, from C$1.2668 on Nov. 21. It traded at C$1.2309 at 11:17 a.m. in Toronto. One Canadian dollar buys 81.22 U.S. cents.
The loonie, as Canada’s dollar is known because of the aquatic bird on the one-dollar coin, will strengthen to around C$1.15 in the short term, Fennell said.
Europe’s Dow Jones Stoxx 600 Index climbed 5.2 percent, while the Standard & Poor’s 500 Index added 3.9 percent. Crude oil for January delivery rose $2.37, or 4.8 percent, to $52.30 a barrel. Crude accounts for about a tenth of Canada’s exports.
Citigroup, which has $2 trillion of assets and operations in more than 100 countries, received $306 billion of U.S. government guarantees.
“Positive developments at Citibank were the main catalyst for stocks to rally today,” said Adam Cole, global head of foreign-exchange strategy at the Royal Bank of Canada in London. Speculation “remains rife” that an economic stimulus plan will be in place by the time President-elect Barack Obama takes office on Jan. 20, Cole added.
Senator Charles Schumer, Democrat from New York, said yesterday on ABC’s “This Week” program that the stimulus package will be between $500 billion and $700 billion.
Canadian Prime Minister Stephen Harper said yesterday that if necessary the country would run a “short-term” deficit to stimulate the economy.
The yield on the two-year government bond rose as much as five basis points, or 0.05 percentage point, to 1.86 percent. It last traded at 1.84 percent. The price of the 2.75 percent security due in December 2010 fell 6 cents to C$101.81.
The 10-year note’s yield increased 4 basis points to 3.51 percent. The price of the 4.25 percent security maturing in June 2018 declined 35 cents to C$105.94.
The decline in bond prices “is occurring globally,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto. “Weekend chatter about fiscal stimulus is at the heart of it.”
To contact the reporter on this story: Chris Fournier in Montreal at email@example.com
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