Canada's Dollar Rises for Third Straight Day as Oil Advances

By Chris Fournier

Aug. 21 (Bloomberg) -- Canada's dollar rose for a third day as the price of crude oil increased.

Crude oil for October delivery also increased for a third day, topping $118 a barrel. Oil and other commodities make up about half of Canada's exports.

Canada's dollar increased 0.6 percent to C$1.0537 per U.S. dollar at 7:51 a.m. in Toronto, from C$1.0537 yesterday. One Canadian dollar buys 94.90 U.S. cents. The currency touched C$1.0728 on Aug. 12, the weakest since August 2007.

``The market will be watching oil,'' said Steve Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto.

Canada's currency sank last week to the lowest in a year and has lost about 4.5 percent as crude oil fell from a record 147.27 a barrel set July 11. Crude oil for October delivery rose 2.7 percent to $118.13 a barrel today on bets Russian supplies may be disrupted because of rising tension with the U.S.

Consumer prices increased 3.4 percent in July from a year ago after a 3.1 percent annual gain during the previous month, Statistics Canada reported today in Ottawa.

``The data is unlikely to influence the Bank of Canada in terms of monetary policy,'' said Jack Spitz, managing director of foreign-exchange trading at National Bank of Canada in Toronto. ``Look for Canadian dollar directional bias from broad U.S. dollar flows, commodity pricing and upcoming U.S. data.''

Canada's central bank held the overnight lending rate at 3 percent for a second consecutive meeting on July 15. The bank's target for annual inflation is 2 percent.

The U.S. dollar has risen against all of the other major currencies this month on speculation the U.S. economic slowdown is spreading to other industrialized countries.

The yield on the two-year government bond fell 2 basis points, or 0.02 percentage point, to 2.77 percent. The price of the 3.75 percent security due in June 2010 increased 3 cents to C$101.68.

To contact the reporter on this story: Chris Fournier in Montreal at Cfournier3@bloomberg.net