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Old 06-06-2013, 05:40 PM
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Default Canada Dollar Gains Most in Year as Poloz Sees Export-Led Growth

By Joseph Ciolli & Ari Altstedter - Jun 6, 2013 12:30 PM ET
The Canadian dollar gained the most in almost almost a year versus its U.S. peer after Bank of Canada Governor Stephen Poloz said he expects a recovery in foreign demand to boost exports.
The currency briefly weakened before extending gains as Poloz, in his first address to lawmakers since taking office on June 3, said “the gathering momentum in foreign demand should help lift the confidence of Canada’s exporters.” He added that he won’t give “running commentary” on whether the nation’s currency is overvalued. The unemployment rates in Canada and the U.S. are forecast to remain unchanged when they are reported tomorrow.
“Poloz showed no willingness to take action to weaken the Canadian dollar,” Adam Button, a currency analyst at Forexlive.com in Montreal, said in a telephone interview. “The traders who piled into U.S. dollar longs over the last month are getting absolutely mangled.” A long position is a bet an asset will increase in value.
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 1.3 percent to C$1.0206 per U.S. dollar at 12:25 p.m. in Toronto after strengthening as much as 1.4 percent, the most since June 29, 2012. One loonie buys 97.98 U.S. cents.
The currency touched C$1.0203, briefly crossing the 200-day moving average of C$1.0204, considered by some traders a measure of momentum.
Oil, Bonds

Crude-oil futures rose 1.3 percent to $94.93 a barrel in New York and the Standard & Poor’s GSCI index of 24 commodities gained 0.4 percent. The S&P 500 Index of stocks fell 0.5 percent.
Canada’s benchmark 10-year government bonds rose, with yields falling three basis points, or 0.03 percentage point, to 2.01 percent. The 1.5 percent security maturing in June 2023 added 27 cents to C$95.15.
“We are now seeing signs of recovery in some important external markets, notably the United States and Japan, and there is continued growth in emerging-market economies,” Poloz said today at a parliamentary hearing in an opening statement released on the bank’s website.
Poloz, formerly chief executive officer of the nation’s trade financing agency, declined to say whether the Canadian dollar was overvalued.
‘Jumpier Markets’

Former Governor Mark Carney, who left June 1 to head theBank of England, kept the key interest rate at 1 percent for the 22nd consecutive meeting on May 29. Poloz will probably maintain Carney’s no-change policy for at least the rest of the year, according to economists surveyed by Bloomberg News.
“The message is pretty much on par with what we’ve heard from the Bank of Canada -- volatility can be expected in jumpier markets,” Greg T. Moore, a currency strategist at Toronto-Dominion Bank, said by phone from Toronto. “The jobs report tomorrow is probably going to have bigger implications.”
Canadian employment rose by 15,000 in May, and the jobless rate was unchanged at 7.2 percent, according to economistssurveyed by Bloomberg News. Canadian employment increased by 12,500 in April as manufacturers added the most jobs in 11 months.
Employment in the U.S. matched April’s stronger-than-projected 165,000 gain, and the unemployment rate remained at a four-year low of 7.5 percent, separate surveys forecast.
Risk Reversals

The one-month so-called 25-delta risk reversal rate fell to 1.0900, its lowest level since May 13. Risk reversals measure the premium on options contracts to sell Canadian dollars versus buying U.S. contracts that do the opposite.
Hedge funds and other large speculators last week decreasedtheir bets the Canadian dollar will decline against the greenback, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 33,359 on May 28, compared with net shorts of 33,852 a week earlier.
Canada’s currency has fallen 1.3 percent in the past month against nine developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. (SPX) The greenback added 0.4 percent, while the Aussie dollar led decliners, dropping 6.4 percent.
To contact the reporters on this story: Ari Altstedter in New York at aaltstedter@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editor responsible for this story:Paul Cox at pcox16@bloomberg.net
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