Canadian Currency Depreciates for Third Day as Crude Oil Reverses Advance

Bloomberg.com   |  December 20 2010 11:10 EST

Canada’s dollar weakened versus its U.S. counterpart for a third day as crude oil, the nation’s largest export, reversed an advance.

The loonie, as the nation’s currency is known, declined after Canadian wholesale prices unexpectedly stalled and the Chicago Federal Reserve’s national activity index fell. The Canadian currency came the closest to parity with the greenback last week in more than a month. Data tomorrow may show gains in the consumer price index slowed while retail sales held steady.

“You’ve got oil prices, which are coming off from the overnight highs, and concerns about what’s going on with the Canadian economy,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital unit in Toronto. “If the U.S. industrial sector isn’t going gangbusters, it can have an impact on Canadian exports to the U.S.”

The Canadian currency depreciated 0.5 percent to 1.0193 per U.S. dollar at 10:36 a.m. in Toronto after earlier advancing as much as 0.4 percent, from C$1.0140 on Dec. 17. It touched C$1.0001 on Dec. 15, the strongest level since it was last at parity on Nov. 11, and reached C$1.0147, a two-week low, on Dec. 17. One Canadian dollar buys 98.11 U.S. cents.

The loonie depreciated last week as an agreement by European Union leaders at a two-day summit in Brussels failed to allay concern the sovereign-debt crisis will spread from Greece and Ireland to other nations in the region. The single currency fell versus 15 of 16 major counterparts today, touching two-week lows against the dollar and the yen, as the European Central Bank voiced concern that Irish banking legislation threatens the ECB’s ability to run its liquidity operation.

Crude for January delivery rose as much as 0.8 percent to $88.75 a barrel before falling 0.9 percent to $87.26 in New York.

To contact the reporters on this story: Chris Fournier in Montreal