By Chris Fournier
March 13 (Bloomberg) -- The Canadian dollar rose, reversing a decline, as investors ventured into riskier assets even as government reports showed Canada’s businesses lost more jobs than economists forecast and its trade deficit widened to a record.
Gains in global stock markets and the prices of commodities such as crude oil and copper dimmed the appeal of traditional havens such as the dollar, the yen and the Swiss franc, which weakened against most major currencies.
“We are actually seeing some hope on the horizon,” said Steven Butler, director of foreign-exchange trading in Toronto at Scotia Capital, a unit of Canada’s third-largest bank. “The world is looking a lot safer after the rally in equities this week. Economic data is taking a back seat.”
The loonie, as Canada’s dollar is known, strengthened 1.1 percent to C$1.2643 per U.S. dollar at 10:13 a.m. in Toronto, from C$1.2778 yesterday. It earlier slipped to C$1.2843. The currency headed for a 1.8 percent gain this week after falling for four straight weeks. One Canadian dollar buys 79.09 U.S. cents.
The MSCI World Index, a gauge comprising the stocks of 23 developed nations, climbed 2.1 percent, the fourth straight gain. Crude for April delivery rose as much as $1.11, or 2.4 percent, to $48.14 a barrel in New York. Aluminum and copper also advanced. Canada’s currency tends to track fluctuations in equity and commodity prices.
“The Canadian dollar has run out of reasons to depreciate against the U.S. dollar,” said Carl Weinberg, chief economist at Valhalla, New York-based High Frequency Economics. “I’m looking for the loonie to stabilize for the next few quarters.”
‘Horrible Number’
Canada lost a net 82,600 jobs in February, Statistics Canada said today in Ottawa. The median forecast of 19 economists surveyed by Bloomberg News was for a reduction of 55,000. Employers cut 129,000 jobs in January. The unemployment rate increased to 7.7 percent last month.
“It’s a horrible number,” said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada’s largest bank. “It’s difficult to find any silver lining in this report.”
Still, Strauss said, “global forces” are the “dominant driver” of the Canadian dollar. He predicted the currency should remain stronger than C$1.30.
Canada posted a record C$993 million ($775 million) trade deficit in January on vanishing trade in automobiles with the U.S., signaling a deepening recession. Economists surveyed by Bloomberg forecast a deficit of C$1 billion.
Major Currencies
The Canadian dollar reached C$1.3064 on March 9, the weakest level since Sept. 2, 2004, on concern the global recession will worsen, crimping demand for commodities, which account for about half of the nation’s export revenue.
The U.S. dollar fell against 11 of the 16 most-actively traded currencies. The dollars of New Zealand and Australia, which like the Canadian currency tend to move in tandem with stocks and commodities, rose 1.2 percent and 0.9 percent, respectively, against the greenback.
The loonie will strengthen to C$1.24 against the U.S. dollar by year-end, according to the median forecast of 42 economists surveyed by Bloomberg News.
“Today’s foreign-exchange response to Canada’s bad economic statistics confirms our assumption that risk perception continues to drive the market,” said Martin Lefebvre, a senior economist at Montreal’s Desjardins Group. “We do not see the Canadian dollar crossing C$1.30 on a sustainable basis.”
The two-year government note’s yield fell one basis point, or 0.01 percentage point, to 0.97 percent. The price of the 2.75 percent security due in December 2010 rose 2 cents to C$103.01.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
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