Canadian Currency Drops to One-Week Low on Weakness in Stocks

By Chris Fournier

April 20 (Bloomberg) -- Canada’s dollar fell to the lowest level in more than a week as U.S. stock-index futures declined and before the Bank of Canada’s decision on interest rates and its report on monetary policy.

“The U.S. dollar is stronger across the board as equities once again dominate price action in foreign exchange,” Adam Cole, London-based global head of currency strategy at RBC Capital Markets Inc., wrote in a note to clients today. “It’s a critical week for the Canadian dollar with the Bank of Canada announcement and monetary policy report.”

The Canadian currency dropped for a third day, declining as much as 1.7 percent to C$1.2337 per U.S. dollar, the weakest level since April 9, before trading at C$1.2328 at 8:13 a.m. in Toronto, compared with C$1.2132 on April 17. One Canadian dollar buys 81.11 U.S. cents.

Futures on the Standard & Poor’s 500 Index expiring in June retreated 1.6 percent on speculation the index has moved too high too quickly. The Canadian dollar tends to track swings in equity indexes.

The loonie will weaken to C$1.26 against the U.S. dollar this quarter before rebounding to C$1.16 by the end of 2010, according to the median forecast in a Bloomberg survey of 36 analysts and economists.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net