Canadian dollar reaches seven-week high on Nexen-deal approval

The Canadian dollar reached a seven- week high versus its U.S. peer as the government approved Cnooc Ltd.’s $15.1 billion takeover bid for Nexen Inc.

Canada’s dollar rose for a fifth day against the greenback after Prime Minister Stephen Harper on Dec. 7 approved Chinese- controlled Cnooc’s bid while cautioning that future investment in Canada’s energy sector will only occur under “exceptional” circumstances and outlining tighter rules for takeovers. The currency gained against the majority of its 16 most-traded counterparts as better-than-forecast factory data from China signaled stronger demand for Canada’s raw materials.

“Odds are it will be quite positive for the Canadian dollar,” Sebastien Galy, senior foreign-exchange strategist for Societe Generale SA, said of the Nexen deal by phone from New York. “There’s been some reservation from Asia about capital flows, and this provides some clarification that there will be regulation and not protectionism.”

The Canadian dollar, called the loonie for the image of the aquatic bird on the C$1 coin, rose 0.2 percent to 98.68 Canadian cents per U.S. dollar at 3:53 p.m. in Toronto, after earlier touching 98.65 cents, strongest since Oct. 19. One Canadian dollar buys $1.0134.

Crude-oil futures fell 0.3 percent to $85.70 per barrel in New York after gaining as much as 1 percent. The Standard & Poor’s 500 Index increased 0.1 percent.

Canadian government bonds rose, with the 10-year benchmark bond yield falling one basis point, or 0.01 percentage point, to 1.70 percent. The 2.75 percent security maturing in June 2022 was 6 cents higher at C$109.15.

Tight Range

Trading of the Canadian dollar versus its U.S. counterpart was at the tightest range since July 4, and is likely to be hemmed in by the prospect of the Nexen deal closing at the end of the year, Greg Moore, a currency strategist at Toronto- Dominion Bank in Toronto, said in a telephone interview.

“A lot of market participants will hold off on buying the USD against CAD if they know it’s going to benefit from a whale- sized flow when the deal closes,” Moore said. “Most of the CAD benefit is a psychological benefit.”

The Canadian government approved the takeover of Nexen and simultaneously gave its blessing to the C$5.2 billion ($5.27 billion) offer for Progress Energy Resources Corp. by Petroliam Nasional Bhd, Malaysia’s state-owned energy company.

Deal-Making

There have been 43 acquisitions of Canadian companies in deals worth more than $3.5 billion since 2000, according to data compiled by Bloomberg. The Canadian dollar has advanced in 56 percent of cases for two weeks following the announcements versus its U.S. counterpart with an average gain of 0.2 percent.

The biggest advance in the Canadian dollar was a 2 percent gain after Kinross Gold Corp. acquired Red Back Mining Inc. in 2010. The largest decline was in July 2008 as Teck Resources Ltd. purchased Fording Canadian Coal Trust.

China’s factory production climbed 10.1 percent in November while retail sales growth accelerated to 14.9 percent, the National Bureau of Statistics said Dec. 9. Both figures exceeded analysts’ median estimates compiled by Bloomberg.

Canada’s currency has gained 1.5 percent this year versus nine developed-nation peers tracked by Bloomberg Correlation- Weighted Indexes. The greenback has dropped 2.3 percent and the yen has been the biggest loser, tumbling 9.5 percent. New Zealand’s dollar leads gainers, up 5.7 percent.

Bloomberg News

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