Canada’s Dollar Falls as Waning Earnings Spur Haven Demand

By Molly Seltzer

Feb. 20 (Bloomberg) -- Canada’s dollar depreciated for the first time in three days as equity markets slumped on concern waning company earnings indicate a deepening recession, driving investors to the relative safety of the U.S. dollar.

“Today it’s all about equities,” said Jonathan Gencher, Toronto-based director of currency sales at BMO Capital Markets, a unit of Canada’s fourth-largest bank. “When equities don’t do well, the Canadian dollar generally doesn’t do well. The U.S. has been the primary currency benefiting from bad economic news because people see the dollar as a safe haven from riskier asset classes, and the loonie is seen as a riskier currency.”

The loonie, as Canada’s dollar is known, fell 0.4 percent to C$1.2617 per U.S. dollar at 8:04 a.m. in Toronto, from C$1.2580 yesterday. It touched C$1.2674 on Feb. 17, the weakest since Jan. 22, when it reached C$1.2740. One Canadian dollar buys 79.25 U.S. cents.

Futures on the Standard & Poor’s 500 Index slid 1.7 percent before the market opened in New York. The MSCI World Index, a gauge of 23 developed countries, decreased 1.2 percent in London, extending its nine-day retreat to 11 percent. Japan’s Topix Index fell to its lowest level since 1984, while Europe’s Dow Jones Stoxx 600 Index slid to a five-year low.

Anglo American Plc, which controls the world’s biggest platinum producer, dropped 15 percent in London after posting earnings that missed analysts’ estimates. The company suspended dividends and share buybacks and will cut 19,000 jobs after copper, zinc and platinum prices collapsed. Commodities such as crude oil, copper and aluminum account for about half of Canada’s export revenue.

The loonie reached a four-year low of C$1.3017 on Oct. 28, and has touched the C$1.30 level twice since before rebounding.

The yield on the two-year government bond dropped three basis points, or 0.03 percentage point, to 1.229 percent. The price of the 2.75 percent security due in December 2010 climbed five cents to C$102.65.

To contact the reporter on this story: Molly Seltzer in New York at mseltzer4@bloomberg.net