Canadian Dollar Fluctuates Versus Major Peers as Crude Oil Erases Advance

Canada’s dollar fluctuated against its U.S. counterpart amid strength in commodities as investors seek to protect their wealth from rising inflation and a weaker U.S. currency.

The loonie, as the currency is nicknamed, pared gains as crude oil erased an advance today. Silver and gold reached record highs. Raw materials, including oil, account for about half of Canada’s export revenue.

“Oil and gold were quite strong to start the day, and those have given back their gains,” said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal. “It’s no surprise to see the Canadian dollar a little weaker.”

The loonie was little changed at 95.44 cents per U.S. dollar at 5:05 p.m. in Toronto after strengthening as much as 0.4 percent. One Canadian dollar buys $1.0478.

The currency has gained 11.5 percent since June, and is approaching the strongest levels since it was allowed to float in 1950. The currency touched 90.58 cents on Nov. 7, 2007, as deepening losses in the U.S. subprime-mortgage market disrupted financial markets and weakened the U.S. dollar.

Fed Plans

The Federal Open Market Committee will leave the target rate for overnight lending between banks at zero to 0.25 percent on April 27, according to all of the 80 economists in a Bloomberg News survey. The benchmark will increase for the first time since December 2008, rising to 0.5 percent, during the first quarter of 2012, according to the median forecast of economists in a separate survey.

“Interest-rate differentials clearly are having an impact,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “While there’s nobody who expects the Fed to raise rates, it will be guidance with respect to how they see monetary policy a number of months forward.”

Bank of Canada officials are forecast to boost the target rate for overnight loans to 1.5 percent during the third quarter and 2 percent during the last three months of 2011, according to the median in a Bloomberg News survey of 24 analysts. The central bank has held its benchmark interest rate at 1 percent since September, when it increased it for the third time last year. The next BOC meeting is May 31.

Bonds Rise

Canadian government bonds rose, pushing the yield on the benchmark 10-year security down five basis points, or 0.05 percentage point, to 3.24 percent. The price of the 3.5 percent security maturing in June 2020 rose 38 cents to C$102.05.

Crude oil futures fell as much as 1.1 percent to $111.08 a barrel in New York after gaining as much as 1.1 percent. Silver for immediate delivery gained 1.4 percent in New York after earlier jumping 5.4 percent to $49.79 an ounce. Gold climbed for a ninth day.

“Commodities have softened up, that’s the main reason we’re off our strong point.” said Shane Enright, executive director at Canadian Imperial Bank of Commerce’s CIBC World Markets unit in Toronto. “Commodities are still in broad terms very strong. You’ve probably just a seen a little bit of profit taking this morning.”

Barrick Gold Corp., the world’s biggest gold company, agreed to buy copper producer Equinox Minerals Ltd. for C$7.32 billion ($7.69 billion), trumping an offer from China’s Minmetals Resources Ltd. Barrick is based in Toronto.

The loonie is down 1.2 percent this year in the Bloomberg Correlation-Weighted Currency Indexes, a measure of the 10 developed-nation currencies. The greenback has lost 5.9 percent.

(Source: http://www.bloomberg.com/news/2011-04-25/canadian-dollar-fluctuates-versus-major-peers-as-crude-oil-erases-advance.html)