By Chris Fournier and Allison Bennett March 13 (Bloomberg) — Canada’s dollar came the closest to parity with its U.S. counterpart since July 2008 as traders bet faster-than-forecast job creation increases odds that the central bank will raise interest rates. The currency, dubbed the loonie after the aquatic bird that adorns the C$1 coin, gained 0.9 percent to C$1.0193 per U.S. dollar from C$1.0288 on March 5. It touched C$1.0156 yesterday, the strongest level since July 25, 2008. One Canadian dollar purchases 98.11 U.S. cents. A report next week is expected to show consumer prices rose as the recovery gains traction. “The Canadian dollar has certainly been the flavor of the month,” said Dean Popplewell, an analyst in Toronto for Oanda Corp., an online currency-trading firm. “I would not be surprised to see a U.S. dollar bounce from here before the loonie again continues its assault on parity and beyond.” The loonie gained for an 11th straight session yesterday, the longest winning streak in 23 years, as crude oil, the nation’s largest export, reached $83 a barrel. The dollar last traded equal to the greenback on July 22, 2008, which was 11 days after crude reached a record high $147.27. Government bonds fell and the yield on interest-rate derivatives that track interest rates rose this week to the highest since January. The yield on the two-year security rose 8 basis points, or 0.08 percentage point, to 1.59 percent, after climbing 24 basis points the week before. The 1.5 percent security due in March 2012 fell 16 cents to C$99.82. Index Swaps The economy added 20,900 jobs in February after gaining 43,000 in the previous month, Statistics Canada said yesterday in Ottawa. The median forecast of 22 economists in a Bloomberg News survey was for an increase of 15,500. Canada’s unemployment rate fell to 8.2 percent, from 8.3 percent. “The Canadian dollar as a relative-value play in the G10 space is an attractive one,” said Brian Kim , a currency strategist at UBS AG in Stamford, Connecticut. “Fundamentals are doing quite well in Canada, and the improvement in the labor situation is definitely a positive.” The Bank of Canada said on March 2 that inflation and economic output are higher than expected, adding to speculation policy makers are moving closer to increasing the 0.25 percent target lending rate . The yield on Canada’s overnight index swap due in one year, a security based on what investors expect the Bank of Canada’s rate will average over that period, rose to 0.91 percent, compared with 0.80 percent a month ago. Commodity Boom The Canadian currency has gained 3.2 percent against the U.S. dollar since the beginning of the month. The Bank of Canada said on March 2 that inflation and economic output are higher than expected, adding to speculation policy makers are moving closer to increasing the 0.25 percent target lending rate . Canada’s dollar traded equal to the U.S. currency in September 2007 for the first time in three decades, capping a five-year run on the back of booming demand for the nation’s commodities. Before that the Canadian currency broke parity November 1976, when Pierre Trudeau was the nation’s prime minister. Canada has benefited over that period from rising demand for copper , gold, wheat and oil from neighboring U.S. and emerging economies such as India and China. The country is the world’s largest producer of uranium, the second-biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. Canada’s financial system was named the soundest in the world for two consecutive years by the Geneva-based World Economic Forum. Central Bank Expectations Canada’s central bank will raise its key overnight rate to 2.25 percent by the middle of next year, according to the average of 11 analysts in a Bloomberg News survey. Finance Minister Jim Flaherty said yesterday the currency gain is a “double-edged sword,” as Canadian goods become more expensive abroad and imports are cheaper to domestic companies. “The increasing value of the dollar does help manufacturers in Canada acquire technology and equipment, a lot of that is priced in U.S. dollars,” he said. Still, “we’re always concerned about the volatility in the dollar.” Canada’s dollar will weaken to C$1.06 by the end of the next quarter, according to the median forecast of 35 economists and analysts surveyed by Bloomberg News. “There is not a strong sense, at the moment at least, that spot is running away on the downside,” Shaun Osborne , chief currency strategist in Toronto at Toronto-Dominion Bank, wrote in a note to clients yesterday, meaning the U.S. dollar is not in freefall versus the Canadian. “The U.S. dollar is looking very over sold already.” To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net ; Allison Bennett in New York at Abennett23@bloomberg.net .
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Canada’s Dollar Approaches Parity With U.S. For First Time Since July 2008
