Canadian dollar on the up as exports to China rise
The Canadian dollar has risen to a three-week high against the US dollar. Higher than expected exports to China are given as the reason why – and the news boosts hopes that a strengthening economy will increase demand for Canada’s commodities.
Housing market
The Canadian currency momentarily lost value when it appeared the country’s housing market was cooling faster than expected.
Bloomberg reported:
Bank of Canada Senior Deputy Governor Tiff Macklem said the “near-term” momentum of the country’s economy appears to be “softer” than projected, even as activity is forecast to pick up this year. Canada’s dollar fell the most in almost three months versus the euro after the region’s central bank held its interest-rate target unchanged.
“As long as commodity prices stay relatively high, our economy will be OK,” Aaron Fennell, a futures specialist a Scotiabank’s ScotiaMcLeod unit in Toronto said by phone from Toronto. “The housing situation is a risk for Canada, but I don’t think we’re going to see the chaos we saw in the United States.”
The Canadian dollar rose 0.5 per cent to 98.32 cents per U.S. dollar at 5:10 pm in Toronto, reaching the strongest level since Decrmber 18. One Canadian dollar buys $1.0171. It weakened 1.1 per cent to C$1.3050 per Euro, touching the largest loss since October 16.
Oil and stocks
The nation’s largest export is crude oil. This rose 0.9 per cent to $93.92 a barrel in New York. The Standard & Poor’s 500 Index rose 0.7 per cent while the S&P/TSX Composite Index, the benchmark Canadian equity gauge, added 0.8 per cent.
Canada’s benchmark 10-year bond fell, with yields rising five basis points, or 0.05 percentage point, to 1.95 percent. The 2.75 per cent note due in June 2022 dropped 44 cents to C$106.79.
According to Bloomberg:
The Canadian government sold C$3.4 billion ($3.44 billion) of 1.25 per cent notes due in March 2018 yesterday, drawing an average yield of 1.494 percent. The Bank of Canada will sell C$3.3 billion of notes maturing in May 2015 on January 16.
Canadian construction permits in November fell 17.9 per cent to C$6.2 billion, the lowest level since January 2012, Statistics Canada said today in Ottawa. Increases in home prices slowed in November, a separate survey showed. The Bank of Canada has said a rapid drop in house prices is a major threat to the Canadian economy, where household debt to disposable income reached a record in the third quarter of last year.
China’s overseas sales rose 14.1 percent in December from a year earlier, almost triple the 5 percent gain forecast in a Bloomberg analyst survey, data showed today.
Outlook for rates
In response to the strengthening forecast for global economy and indications of a strengthening job market, experts have brought forward estimates of a Bank of Canada rate increase into 2013.
The central bank will raise its one per cent benchmark interest rate by one quarter of a percentage point by the end of this year, according to the median estimate of 23 economists surveyed by Bloomberg News from January 4 to January 9.
In a survey carried out by the news service last month, economists predicted such an increase would not happen until the first quarter of 2014.
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