Canadian Currency Strengthens for Third Day Against U.S. Dollar

By Chris Fournier

April 9 (Bloomberg) -- Canada’s dollar rose for a third day against its U.S. counterpart on signs deterioration in the world’s eighth-largest economy may be losing momentum and improved prospects for commodity currencies.

The Canadian currency, known as the loonie, climbed after the nation unexpectedly posted a trade surplus of C$126 million ($102 million)in February on shipments of cars and airplanes. Economists forecast a deficit of C$1.2 billion, according to the median estimate in a Bloomberg News survey. Commodities, which accounted for 56 percent of Canada’s export revenue last year, advanced.

“As we get through 2009, the market is going to continue to like commodity-linked currencies,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. He predicts the loonie will appreciate to C$1.18 by year-end.

The Canadian dollar rose 0.8 percent to C$1.2266 per U.S. dollar at 10:51 a.m. in Toronto, from C$1.2364 yesterday. One Canadian dollar buys 81.53 U.S. cents. The Canadian dollar tends to track fluctuations in stocks and commodity prices.

The Standard & Poor’s 500 Index rose 2.6 percent after Wells Fargo & Co. said first-quarter earnings would be better than expected.

Crude oil for May delivery rose 4.7 percent to $51.68 a barrel. Copper futures for May delivery gained 3.1 percent in New York to $2.061 a pound, heading for the fourth consecutive weekly increase.

Risk Appetite

“Generally the fall in commodity prices seems to have stopped,” said Aaron Fennell, a Toronto-based futures and currency broker at MF Global Canada Co., a unit of MF Global Ltd. “In terms of risk appetite, traders seem to be more willing to look for the bottom in the various commodity markets. Many traders are planning their strategies for how they want to be positioned as we come out of the recession.”

After reaching a four-year low of C$1.3064 on March 9, the loonie appreciated as investors ventured out of haven currencies such as the U.S. dollar and the Japanese yen. They purchased riskier assets such as stocks and commodity-linked currencies.

Canadian employers pared a net 61,300 jobs, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg predicted employment would fall by 50,000.

The loonie will weaken to C$1.26 against the greenback by the end of this quarter, according to the median forecast in a Bloomberg survey of 37 economists.

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