Canadian Dollar Rises for First Time in a Week on Commodities

By Daniel Kruger

Sept. 12 (Bloomberg) -- The Canadian dollar rose for the first time in a week as prices for crude oil, gold and other commodities rose.

The currency's increase was the biggest in three weeks. Commodities were bolstered as the U.S. dollar weakened against most major currencies amid investor speculation a possible deal to buy New York-based Lehman Brothers Holdings Inc. would reduce systemic risk to global financial markets.

The Canadian dollar is helped by ``broad-based dollar weakness,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. ``Plus, we've seen a small rebound in commodities which is obviously benefiting the Canadian dollar as well. It's getting help from both sides.''

The Canadian currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, appreciated 0.8 percent to C$1.0666 per U.S. dollar at 9:08 a.m. in Toronto, from C$1.0752 yesterday. Earlier it advanced as high as C$1.0763. One Canadian dollar buys 93.76 U.S. cents.

Crude oil rose 0.6 percent to $101.46 a barrel from $100.87 yesterday, the lowest close since March. Gold for immediate delivery climbed $8.11, or 1.1 percent, to $754.58 an ounce in London. The metal yesterday reached its lowest since October.

Canadian industrial companies' use of their production capacity fell to the lowest in 16 years last quarter amid weak demand from the U.S.

Industrial Production

The share of plants in use fell to 78.9 percent from April to June, compared with the 78.8 percent median forecast of 10 economists in a Bloomberg News survey. Capacity utilization was the lowest since 1992, marking the fourth straight three-month period in which the index fell, Statistics Canada said today.

Demand for commodities, which account for about half of Canada's exports, has weakened with the slowdown in the global economy. The Canadian dollar has fallen 5.6 percent since July 11, when crude futures peaked at $147.27 a barrel.

The global economy may slow to about 3 percent growth in late 2008 from 5 percent in the previous year before re- accelerating toward 4 percent in 2009, said John Lipsky, first deputy managing director of the Washington-based International Monetary Fund, on Sept. 9.

The Canadian currency will fall to C$1.10 per U.S. dollar in the second quarter of 2009, according to a Bloomberg News survey of 34 firms.

To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net