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2013.04.1705:32:23UTC+00Canadian Dollar bolster after biggest decline since 2011 as Gold surge

The Canadian dollar advances versus its U.S. counterpart after yesterday’s biggest drop in more than a year as gold pared losses following a 14 percent two-day decline that damped demand for commodity-linked currencies.

The loonie, as the currency is nicknamed, backslide against its commodity peers, the Australian and New Zealand dollars, as gold for immediate delivery acquired 2.6 percent. Slower-than-forecast economic data in Canada, China and in the U.S., the nation’s biggest trading partner, is projected to lead the Bank of Canada to revise down progress forecasts as it leaves its 1 percent interest rate in place at its policy meeting tomorrow. Canadian factory sales boost more than forecast in February.

“I think retracement is really the big word of the day, for not just gold, but all commodities and the commodity currencies, including the Canadian dollar,” said Greg T. Moore, a currency strategist at Toronto-Dominion Bank, by phone from Toronto. “The risks seem to be for the downside for the Canadian dollar. The Bank of Canada is obviously going to have to recognize the disappointing data that we’ve had through the first quarter.”

The loonie skyrocketed 0.5 percent to C$1.0207 per U.S. dollar at 5:05 p.m. in Toronto. Yesterday it reached C$1.0259, a 1.2 percent drop and the largest since Dec. 8, 2011. One loonie purchases 97.93 U.S. cents.

Gold Weights

Although the world’s two largest gold producers by market value are Canadian, gold miners account for only 6.1 percent of the Standard & Poor’s Toronto Stock Exchange Index. Goldcorp Inc. is the largest by market worth and Barrick Gold Corp. is the second biggest.

Futures on crude oil, the country’s largest export, moved a notch after reaching $86.06, the worst level since November. The Standard & Poor’s 500 Index of U.S. stocks improved by 1.4 percent.

“When you look through what Canada exports and who it exports to, you can come to the conclusion that maybe the disappointment in China probably wasn’t as significant as the market thought it was yesterday,” said Jane Foley, senior currency strategist at Rabobank International in London. “Maybe there is a little bit of a recovery from the selloff we had earlier in the week.”

Canada’s standard 10-year government bonds submerged, with yields flying three basis points or 0.03 percentage point to 1.74 percent. The 1.5 percent security maturing in June 2023 lost 25 cents to C$97.83

The Bank of Canada will declare additional details on April 18 about an April 24 auction of securities maturing in 2015.

Economic Data

A faster-than-predicted pickup in factory sales in February follows weaker-than-assumed gross domestic product data in China, an expected decline in retail sales in the U.S., and the largest monthly job loss in Canada since 2009.

Canadian factory sales moved higher in February at the hair triggering pace since July 2011, with sales boosting 2.6 percent to C$49.6 billion ($48.5 billion), tracking down a revised January downturn of 0.6 percent, Statistics Canada said today in Ottawa. The increase exceeded all 18 economist forecasts in a Bloomberg survey with a median estimate of a 0.6 percent gain

“The market is looking for more of a dovish stance from the Bank of Canada, potentially even going to a neutral stance and taking any sort of hiking rhetoric out of the statement,” said Darcy Browne managing director of currencies at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, by phone from Toronto. “When the Canadian dollar strengthens people will sell that and if the U.S. dollar weakens people are looking to buy that.

Central-bank officials have held the standard interest rate at 1 percent since September 2010 to help the economy.


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