Canada Dollar Drops for First Time in March as Crude Oil Falls

By Allison Bennett and Chris Fournier


March 18 (Bloomberg) -- Canada’s dollar depreciated against its U.S. counterpart for the first time this month as crude oil, the nation’s biggest export, and stocks declined.

Canada’s currency, nicknamed the loonie for the image of the aquatic bird that adorns the C$1 coin, earlier traded within one cent of parity with the greenback for a second day. The loonie yesterday touched C$1.0071, its strongest level against the greenback since July 23, 2008.

“Base metals, oil, and equity markets were all down today,” said Matthew Strauss, senior currency strategist in Toronto at Royal Bank of Canada. “There wasn’t a fundamental reason for dollar-Canada to push towards parity.”

The Canadian currency depreciated 0.4 percent to C$1.0141 at 5 p.m. in Toronto, from C$1.0104 yesterday. It earlier reached C$1.0090. One Canadian dollar buys 98.61 U.S. cents.

Crude oil for April delivery fell 0.9 percent to $82.14 a barrel on the New York Mercantile Exchange. Copper futures for May delivery fell 0.4 percent on New York’s Comex. The S&P/TSX Composite Index, Canada’s equity benchmark, weakened 0.5 percent.

The Canadian dollar tends to track movements in stocks and commodities.

The yield on Canada’s two-year security declined three basis points, or 0.03 percentage points, to 1.56 percent. The 1.5 percent note due in March 2012 gained 7 cents to C$99.91.

‘Bearish Tone’

“The Canadian dollar is driven by other majors like the euro, which has accelerated through stops below $1.3650,” said Christian Dupont, a currency trader at Desjardins Group in Montreal. Currency markets have “an already bearish tone due to the Greek situation that looks less clear every day.” Stops are automatic trading orders designed to limit losses.

The euro fell 0.9 percent to $1.3611 as Greek Prime Minister George Papandreou set a one-week deadline for the European Union to create a financial aid mechanism for Greece and challenged Germany to give up its doubts about a rescue package.

Papandreou said he may turn to the International Monetary Fund to overcome Greece’s debt crisis unless leaders agree to set up a lending facility at a summit March 25-26. The IMF option has already been dismissed by European Central Bank President Jean-Claude Trichet and French President Nicolas Sarkozy, who say it would show the EU can’t solve its own crises.

‘Bit of a Breather’

“There’s so much contradictory news coming out of Greece,” said Eric Lascelles, chief economics and rates strategist at Toronto-Dominion Bank. “There’s moderate safe haven effect that’s favoring the U.S. dollar. It really seems to be a risk off day.”

The Canadian currency has gained in 13 of the last 16 sessions, and appreciated 2.1 percent against the greenback since March 2, when the Bank of Canada said the nation’s inflation and economic output have been higher than expected. The comments spurred speculation the central bank will raise benchmark interest rates before the Federal Reserve.

“The market is taking a little bit of breather after such a one-way move,” said Steve Butler, director of foreign- exchange trading in Toronto at Bank of Nova Scotia. “You can’t go one way all the time.”

Canada’s dollar rose to par with the greenback in September 2007 for the first time in three decades amid booming demand for raw materials. It was last at parity on July 22, 2008, and then lost 18 percent that year as the credit crisis crushed demand for commodities.

A report tomorrow is expected to show that the nation’s consumer prices rose 1.4 percent from a year earlier, the fifth straight gain, according to the median forecast of 19 economists in a Bloomberg survey.