Canadian Dollar Gains as Commodities Including Oil Increase

By Michael J. Moore

Oct. 29 (Bloomberg) -- The Canadian dollar gained for a second day, its longest winning streak in more than a month, as its U.S. counterpart weakened versus most of the world's major currencies and commodities including oil and gold increased.

Canada's dollar has strengthened 3.2 percent since Sept. 24, after declining during four straight weeks. Crude oil accounts for 21 percent of the weighting in the Bank of Canada Commodity Price Index, the largest component.

``The sight of oil prices rebounding a bit is giving the Canadian dollar a little bit of attraction,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``The U.S. dollar is also looking a little bit weaker overall, and we expect to see some volatility here over the next day or two.''

The Canadian dollar increased as much as 3 percent to C$1.2359 per U.S. dollar, from C$1.2732 yesterday. It gained for two days during Sept. 25-26. The currency traded at C$1.2375 at 10:11 a.m. in Toronto. One Canadian dollar buys 80.76 U.S. cents.

Crude oil for December delivery gained as much as $4.24, or 6.8 percent, to $66.97 a barrel. It reached a record $147.27 on July 11.

Gold increased $11.50, or 1.6 percent, to $750.80 an ounce. Natural gas rose 4.4 percent to $6.46 per million British thermal units.

The loonie, as Canada's currency is known because of the aquatic bird on the one-dollar coin, strengthened against 12 of the 16 most-actively traded currencies. It fell against three commodity-based currencies, dropping 1.2 percent against South Africa's rand, 1.3 percent versus New Zealand's dollar and 0.5 percent against Australia's dollar.

Canada's Stocks Gain

The MSCI World Index added 3 percent to 918.81. The Standard & Poor's/TSX Composite Index, Canada's main stock benchmark, rose 1.6 percent.

``Higher equity valuations across the globe are attracting better tolerance for risk,'' said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. ``There are signs that the U.S. equity market may be bottoming out. Ultimately we'll see some better sessions for the Canadian dollar, if not now, then perhaps next week after the month end.''

Canada's dollar has fallen 15 percent in October. Spitz said the Canadian dollar will rebound to between C$1.15 and C$1.20 by the end of this year.

The 10-year note's yield rose 1 basis point, or 0.01 percentage point, to 3.70 percent. The price of the 4.25 percent security maturing in June 2018 fell 10 cents to C$104.40.

The yield on the two-year government bond dropped 2 basis points to 2.07 percent. The price of the 2.75 percent security due in December 2010 added 4 cents to C$101.39.

The 10-year bond yielded 163 basis points more than the two- year security, the widest spread since September 2004.

To contact the reporter on this story: Michael J. Moore in New York at Mmoore55@bloomberg.net.