Canada’s dollar reached its strongest point in a week versus its U.S. peer as the nation’s current- account deficit narrowed more than economists forecast in the first quarter on rising commodity exports.
The currency erased earlier losses against the greenback as a report showed the U.S. economy expanded less than estimated in the first quarter. Canada’s dollar gained as crude oil, the nation’s largest export, rebounded from a four-week low.
“We’ve seen broad-based U.S. dollar weakness,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia, said by phone from Toronto. “We have a market that’s very long U.S. dollars and I think increasingly they’re becoming nervous with those positions.” A long position is a bet an asset will appreciate in value.
The loonie, as the Canadian dollar is nicknamed, rose 0.4% to C$1.0307 per U.S. dollar at 11:54 a.m. in Toronto, after touching C$1.0297 per U.S. dollar, its strongest since May 23. The currency reached C$1.0421 per U.S. dollar yesterday, its lowest level since June 5, 2012. One loonie buys 97.02 U.S. cents.
The gain trimmed the loonie’s monthly decline versus the greenback to 2.3%.
Oil futures gained 0.8% to $93.83 a barrel in New York after falling as much as 1.6%. It touched $91.65, the lowest level since May 2.
Canada’s benchmark 10-year government bonds were little changed with yields at 2.06%. The 1.5% security maturing in June 2023 cost C$94.96.
Canada’s deficit of C$14.1 billion (C$13.6 billion) from January to March reported by Statistics Canada in Ottawa was smaller than the C$15.6 billion shortfall forecast in a Bloomberg economist survey with 16 responses. The fourth quarter gap was revised to C$14.6 billion from C$17.3 billion.
“The current account looking slightly better, or at least not as bad as feared,” Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce, said by phone from London. The American economic report was “slightly negative for the U.S. side of the equation,”
The U.S. economy grew at a 2.4% annual rate in the first quarter, the Commerce Department said in Washington. The median forecast in a Bloomberg survey called for no revision from the 2.5% pace initially reported.
Applications for jobless benefits in the U.S. increased 10,000 to 354,000 in the week ended May 25, Labor Department figures showed today in Washington. Economists called for 340,000 claims, according to the median forecast in a Bloomberg survey.
The cost to insure against declines in the loonie versus its U.S. counterpart fell to the lowest level in two weeks. The three-month so-called 25-delta risk reversal rate touched 1.45%, the lowest since May 14.
Risk reversals measure the premium on options contracts to sell Canadian dollars versus buying U.S. contracts that do the opposite.
“There’s been quite a bit of chatter around U.S. dollar selling on month-end tomorrow,” said Greg T. Moore, currency strategist at Toronto-Dominion Bank, by phone from Toronto. “There’s been some fairly significant moves in rates, equities and foreign-exchange markets over the past month, so I think -- put all that together -- there’s some re-balancing that suggests the U.S. dollar should be sold today.”
The Canadian dollar has declined in the past week along with other dollar-bloc currencies in a basket of 10 developed nation currencies tracked by the Bloomberg Correlation Weighted Index. The loonie and greenback have fallen 0.4%, while the dollars of Australia and New Zealand have declined 1.4% and 1.2%. The franc rose 1.1% to lead gainers.