The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, pared earlier losses after the survey showed businesses plan the fastest price increases in more than a decade. Finance Minister Jim Flaherty said the loonie’s rise has been “orderly” and reflects the country’s good fiscal position.
“It’s a hugely important and useful survey, and it’s one that confirms that the recovery is intact,” said Eric Lascelles, chief economics and rates strategist at Toronto Dominion Bank’s TD Securities unit in Toronto. He forecasts the loonie will appreciate through parity to 98 cents by the end of the quarter.
The Canadian currency traded at C$1.0026 per U.S. dollar at 4:25 p.m. in Toronto, compared with C$1.0027 on April 9. It earlier weakened as much as 0.6 percent. One Canadian dollar buys 99.74 U.S. cents.
Government bonds were little changed.
Canada’s dollar, which has gained 5.1 percent against the U.S. dollar this year, achieved parity last week with its U.S. counterpart for the first time in almost two years.
‘Relatively Orderly’
The appreciation “has been relatively orderly; it has not been particularly erratic,” Flaherty, 60, told reporters in Winnipeg, Manitoba. “It gives some comfort I think to business in Canada that they can deal with it.”
The central bank’s quarterly Business Outlook Survey showed 64 percent of executives said sales growth will quicken over the next year, while another 20 percent expect sales to slow, the Ottawa-based central bank said today.
Forty-five percent of companies said they will charge more for their products, and 17 percent predicted slower price gains. The so-called balance of opinion was 28 percent, the highest level since the question was first asked in 1998.
“Responses to the spring survey provide further evidence that the recovery is taking hold,” the bank said.
Canada’s dollar earlier depreciated along with other commodity-linked currencies after the announcement of a rescue package for Greece’s economy boosted the euro.
Euro-region finance ministers said yesterday they would offer as much as 30 billion euros ($41 billion) in three-year loans in 2010 at around 5 percent. As much as 15 billion euros more would come from the International Monetary Fund. The euro touched a three-week high of $1.3692 against the greenback.
Interest Rates
The Canadian currency gained last week amid speculation the central bank will increase interest rates faster than the Federal Reserve.
The Bank of Canada will raise its overnight rate to 1.25 percent from a record low 0.25 percent by year-end, according to a Bloomberg survey. The Fed will increase its benchmark to 0.75 percent by then, from a current range of zero to 0.25 percent, another Bloomberg survey showed. The Canadian central bank next meets on April 20, and U.S. policy makers meet on April 28.
“The data that was released this morning by the Bank of Canada suggests that the growing probability of a rate hike in June,” said Stefane Marion, chief economist and strategist at National Bank Financial Inc. in Montreal. “The data right now is so strong that it would justify the Bank of Canada to move somewhat sooner, so that could help the Canadian dollar.”
Marion predicts the loonie will appreciate two cents past parity, and end the year back at 95 U.S. cents.
Bank of Canada Governor Mark Carney signaled last month he’s open to raising the key rate as soon as June 1 as inflation and growth outpace forecasts.
The 10-year Canadian note yield rose one basis point today, or 0.01 percentage point, to 3.66 percent. The price of the 3.75 percent security due in June 2019 declined 8 cents to C$100.71.
Canada’s government bonds have made investors 0.7 percent this year, according to a Merrill Lynch & Co. index.
