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

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. Government bonds rose.

“Crude is making new intraday lows and that’s weighing on the Canadian dollar,” said , a Montreal-based institutional-derivatives broker at MF Global Canada Co. “It’s only a brief respite before further gains.”

The Canadian currency depreciated 0.2 percent to C$1.0126 at 1:25 p.m. in Toronto, from C$1.0104 yesterday. It earlier reached C$1.0090. One Canadian dollar buys 98.73 U.S. cents.

Crude oil for April delivery fell as much as 1.5 percent to $81.68 a barrel on the New York Mercantile Exchange. The fell 0.2 percent and the S&P/TSX Composite Index, Canada’s equity benchmark, weakened 0.6 percent. Gauges of energy and raw-material producers in the S&P 500 dropped at least 0.8 percent.

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

The yield on Canada’s two-year security declined two basis points, or 0.02 percentage points, to 1.567 percent. The 1.5 percent note due in March 2012 gained 4 cents to C$99.89.

‘Bearish Tone’

“The Canadian dollar is driven by other majors like the euro, which has accelerated through stops below $1.3650,” said , 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 as much as 1.1 percent to $1.3587 as Greek Prime Minister 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 and French President , who say it would show the EU can’t solve its own crises.

‘Contradictory News’

“There’s so much contradictory news coming out of Greece,” , 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 15 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.

‘Bit of Breather’

“The market is taking a little bit of breather after such a one-way move,” said , 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.

Asian Currencies Fall, Led by Won, on Intervention Risk, Greece

It etreated from a 19-month high, led by South Korea’s won and the Taiwan dollar, on speculation central banks will seek to limit appreciation that may hurt exports.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, also declined after a spokesman for Germany’s ruling party said Greece should go to the International Monetary Fund if it needs aid, damping demand for riskier assets. The ringgit weakened on speculation China will tighten lending curbs to stem inflation, tempering the outlook for regional trade.

“If this kind of strength for Asian currencies continues, central banks may need to do something,” said , an economist in Singapore at United Overseas Bank Ltd. “On the European side, we have Germany coming out to say they are not in favor of having the EU help Greece. That would be another risk factor to watch out for that would favor the dollar.”

The won slid 0.5 percent to 1,133.85 per dollar at the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The Taiwan dollar fell 0.3 percent to NT$31.825, and the ringgit declined 0.4 percent to 3.3080. slipped 0.2 percent to 111.90, after yesterday posting its highest close since August 2008.

Greece has announced three sets of austerity measures this year to help allay concern it would struggle to finance a budget deficit that reached 12.7 percent of gross domestic product last year, the European Union’s highest. The risk of default helped shore up support for the in the last two months and sapped demand for emerging-market assets.

Stock Inflows

The Korean currency has strengthened 2.3 percent this month as overseas investors pumped $2.6 billion into the nation’s shares, that helped the benchmark stock index recover from a slide of as much as 7.7 percent this year. Samsung Electronics Co. and Hynix Semiconductor Inc. increased their share of the global semiconductor market last year, narrowing Intel Corp.’s lead, ISuppli Corp. said yesterday.

“A big level for the won is 1,120 through 1,130 against the dollar, and there are some rumors that the Bank of Korea has been in the market,” said , head of foreign- exchange trading at Standard Chartered Plc in Hong Kong. “The fundamentals still point to a lower dollar against Asian currencies.”

China Curbs

The ringgit slipped from near a 19-month high against the dollar on concern spending will cool in China, Malaysia’s biggest export market. China has banned loans to developers hoarding land to wait for higher prices, the China Securities Journal reported today.

“China issues are grabbing the center stage, causing market players to be a bit on the cautious side,” said , a foreign-exchange trader at CIMB Investment Bank Bhd. in Kuala Lumpur.

The ringgit today reached 3.2920 per dollar, just shy of a 19-month high of 3.2910 set on March 12.

Taiwan’s dollar retreated from the strongest level in 18 months on speculation the central bank intervened to limit gains that may derail a recovery in exports. The monetary authority is closely monitoring overseas fund inflows, Governor Perng Fai-nan told lawmakers in Taipei yesterday.

It reached NT$31.667 earlier, the strongest level since September 2008, as global funds purchased NT$12.4 billion ($392.7 million) more local shares than they sold today.

Export Orders

“The central bank doesn’t want big fluctuations in the Taiwan dollar,” said , a fixed-income trader at Taiwan International Securities Corp. in Taipei. “It is allowing appreciation, but only a slow one.”

A Taiwan government report tomorrow may show export orders, an indication of shipments in the next one to three months, increased for a fifth month in February, according to economists surveyed by Bloomberg.

Export orders climbed 31.3 percent last month from a year earlier, after gaining a record 71.8 percent in January, according to the median estimate of economists before a government report tomorrow.

Elsewhere, Thailand’s baht was little changed at 32.31 and the Singapore dollar declined 0.2 percent to S$1.3939 versus the greenback. The Indonesian rupiah fell 0.1 percent to 9,125 and the Philippine peso weakened 0.2 percent to 45.69. China’s yuan were little changed at 6.8259.

OPEC Agrees for Fifth Time to Leave Quotas Unchanged

The Organization of Petroleum Exporting Countries has reaffirmed the quotas at every meeting since they were set in December 2008, even though the group is exceeding that limit by the equivalent of a supertanker of crude a day. OPEC, supplying about 40 percent of the world’s oil, set its official cap at 24.845 million barrels a day.

“OPEC has obviously been quite happy with the current price range,” said Mike Wittner, head of oil research at Societe Generale SA . “Later this year, OPEC will have to think about whether they are comfortable with higher prices.”

OPEC members excluding Iraq pumped 26.8 million barrels a day last month, 1.9 million more than the target, data compiled by Bloomberg show. Shipments will rise again this month, according to tanker-tracker Oil Movements.

Oil prices surged 78 percent last year as OPEC curtailed as much as 3.7 million barrels a day of output and the global economy started to emerge from its worst slump since World War II. Crude futures traded as high as $82.56 a barrel today on the New York Mercantile Exchange, up 3.7 percent this year.

‘Beautiful’

Current prices are “beautiful,” Saudi Arabian Oil Minister Ali al-Naimi told reporters before the start of today’s meeting. At OPEC’s last meeting in December 2009, he said prices between $70 and $80 a barrel are “perfect.” Angolan Oil Minister Jose Maria Botelho de Vasconcelos said yesterday that prices between $80 and $90 a barrel are good and $90 would be too high.

One minister, Algeria’s Chakib Khelil, said the group may have to raise production quotas later this year because of rising prices. There is a “50-50 chance” that output limits will be raised at a subsequent meeting in September, he told reporters yesterday.

“The world is going to need additional OPEC crude output,” said Wittner of Societe Generale. “We expect continued draw downs in inventories and rising prices assuming the global economic recovery continues.”

Too Much Oil

For now, OPEC said its own analysis shows it is pumping more oil than is needed. OPEC estimated in a March 10 report that its current production is 1.5 million barrels a day more than the demand for its crude in the second quarter, after analyzing non-member production and global consumption. In February, members complied with 53 percent of the record 4.2 million barrels a day cuts announced in 2008, OPEC data shows.

Nigeria and Angola are exceeding their quotas and have a standing request with OPEC to enlarge their entitlement. The organization typically avoids tackling such issues until it makes broader changes. The national quotas are not published on the group’s Web site.

OPEC plans to add 12 million barrels to its daily production capacity by 2015, equal to what Saudi Arabia can pump today. The gains would exceed the expected growth in demand, according to the International Energy Agency.

Goldman Sachs, Bank of America Merrill Lynch and Societe Generale SA forecast that demand for oil will recover, requiring new crude supply. Goldman Sachs sees crude reaching $96.50 a barrel within 12 months, while Societe Generale forecasts an average of $104 in 2012 and Merrill says prices may rise as high as $150 in 2014.

Production from the 11 OPEC members bound by quotas rose to 26.811 million barrels a day in February, the organization said in a March 10 report. Shipments will increase 0.9 percent by the end of the month, according to Oil Movements based in Halifax, England.

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from production quotas.

-- With assistance from Mahmoud Kassem, Jonathan Tirone and Ayesha Daya in Vienna, and Alexander Kwiatowski, Rachel Graham and Brian Murphy in London. Editors: Mike Anderson, John Buckley.

Yen, Dollar Fall as Central Bank Outlook Boosts Risk Appetite

The yen and dollar weakened after the Japanese and U.S. central banks pledged to keep interest rates near zero, boosting demand for stocks and higher-yielding currencies.

The Japanese and U.S. currencies fell most against the South African rand and New Zealand dollar after the Bank of Japan doubled a loan program aimed at countering deflation and the Federal Reserve retained a pledge yesterday to keep its target rate “exceptionally low” for an “extended period.” The pound rose to the highest in almost three weeks versus the dollar after a report showed U.K. jobless claims unexpectedly fell in February at the fastest pace since 1997.

“We’re in risk-on mode now,” said Omer Esiner, a senior currency analyst in Washington at Travelex Global Business Payments. “We had another pledge by a central bank to keep the spigots open. Risk assets and higher-yielding currencies are outperforming at the expense of the dollar and the yen.”

The yen fell to 124.49 per euro at 9:11 a.m. in New York from 124.31 yesterday in New York. It slid to 90.48 per dollar from 90.31. The dollar was little changed at $1.3763 per euro compared with $1.3766, after reaching $1.3818, the lowest since Feb. 9. Sterling jumped 0.7 percent to $1.5342, after trading at $1.5382, the strongest since Feb. 25.

The MSCI World Index of equities advanced 0.5 percent, and Japan’s stock benchmarks rose to eight-week highs after the Bank of Japan’s announcement.

BOJ, Fed

The yen fell against the dollar as the Bank of Japan’s credit-easing measures fell short of some analysts’ forecasts. Governor Masaaki Shirakawa and his board doubled the three-month loan facility to 20 trillion yen ($222 billion), the bank said in a statement after its meeting in Tokyo.

The dollar dropped against 12 of the 16 most-traded currencies tracked by Bloomberg a day after the Federal Open Market Committee left the federal funds rate target for overnight loans between banks in a range of zero to 0.25 percent, where it’s been since December 2008.

“The much-anticipated monetary-policy decisions from both the Fed and the BOJ have proved largely uneventful, and are unlikely to derail the recent weakening trend in both the dollar and the yen,” Lee Hardman, a foreign-exchange strategist at Bank of Tokyo Mitsubishi UFJ Ltd. in London, wrote in a note today. “Risk assets should continue to outperform.”

A U.S. report today showed wholesale prices dropped in February for the first time in five months. Prices paid to U.S. factories, farmers and other producers fell 0.6 percent in February, exceeding a 0.2 percent drop in the median forecast of 70 economists surveyed by Bloomberg News.

‘Seems Fantasy’

Harvard University Professor Martin Feldstein, who warned almost two decades ago that the euro would prove an “economic liability,” said Greece’s austerity plan will fail and the country may quit the single currency to fix its fiscal crisis.

“The idea that Greece can go from a 12 percent deficit now to a 3 percent deficit two years from now seems fantasy,” Feldstein, an adviser to U.S. presidents since Ronald Reagan, said in a March 13 interview in Geneva. “The alternatives are to default in some way or to leave, or both.”

The pound rose versus 14 of 16 major currencies tracked by Bloomberg and gained for a second day versus the dollar after minutes released today showed Bank of England policy makers unanimously kept their 200 billion-pound ($304 billion) bond- purchase program on hold for a second month on March 4 as some officials argued that inflation risks have increased.

U.K. Jobless

A separate report showed the number of people receiving unemployment benefits dropped 32,300 from January to 1.59 million, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 29 economists was for an increase of 6,000.

“The pound is recovering, as the labor report is not bad and the BoE was less dovish than some feared,” said David Deddouche, a foreign-exchange strategist for Societe Generale SA in Paris. “But we believe that might be only a temporary rebound. Longer term, the risks are that sovereign-risk concern continues to affect the currency, particularly so ahead of the elections.”

The pound has lost 5 percent against the dollar this year on concern this year’s election won’t result in a government with a majority of seats to push through budget-deficit cuts.

Canada’s currency reached its strongest level since July 2008 against the greenback after crude oil for April delivery climbed 2.4 percent yesterday, the most since Feb. 16. The currency has risen 3.9 percent this year. Oil is one of the nation’s biggest exports.

Canada is on course to be the first Group of Seven nation to erase its budget gap after the global financial crisis with its economy expanding at a 5 percent annualized rate in the fourth quarter. The Canadian dollar reached C$1.0103.

New Zealand’s dollar, also a commodity-linked currency, rose as much as 0.9 percent to touch 71.59 U.S. cents, the highest level since Jan. 26.