The Canadian dollar traded within a cent of parity with its U.S. counterpart as stocks and commodities gained on signs of global economic recovery, spurring demand for currencies tied to growth.

The loonie, as Canada’s dollar is nicknamed, strengthened against 14 of its 16 most traded counterparts before a U.S. payrolls report tomorrow forecast to show employers added jobs in March. Canada’s dollar is headed toward a weekly gain in a holiday-shortened week as a report yesterday showed the nation’s economy grew in January at the fastest pace in three years.

“Parity can happen at any time and we certainly expect it to be achieved within three months,” said Sacha Tihanyi, a currency strategist in Toronto at Bank of Nova Scotia, Canada’s third-largest bank. “There’s just so much positive economic data coming out of Canada that there hasn’t been anything to shake that sentiment.”

The loonie appreciated 0.6 percent to C$1.0083 per U.S. dollar at 12:46 p.m. in Toronto, from $C1.0153 yesterday. It touched C$1.0069, its strongest level since March 19. One Canadian dollar buys 98.86 U.S. cents. The loonie has gained 1.8 percent versus the greenback so far this week from C$1.0266 on March 26.

The Standard & Poor’s 500 Index rose 0.7 percent. Crude oil for May delivery rose as much as 1.7 percent to a 17-month high of $85.22 a barrel on the New York Mercantile Exchange. Crude oil is Canada’s biggest export. The loonie tends to track movements in stocks and commodities.

Manufacturing Data

Oil rose after economic data from the world’s three largest economies reinforced confidence in the global economic rebound. U.S. manufacturing expanded last month at the fastest pace since July 2004, according to the Institute for Supply Management’s factory index, which exceeded economists’ forecasts.

China’s manufacturing expanded at a faster pace while a Bank of Japan survey showed confidence among the nation’s largest manufacturers rose for a fourth straight quarter.

“The tone of data releases were all better-than- expected,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “Equities and commodities are posting gains. Unsurprisingly, the Canadian dollar as a risk-correlated currency is doing well.”

Canada is “not going to be protectionist,” Finance Minister Jim Flaherty said today in an interview on Bloomberg Radio. While Canadian companies are not doing enough to boost productivity, the country’s automobile sector is improving after last year’s shutdowns, he said.

U.S. Payrolls

The Canadian dollar reached C$1.0062 on March 19, the strongest level since July 23, 2008, on speculation the nation’s accelerating economic recovery will spur the Bank of Canada to raise interest rates before the U.S. Federal Reserve.

“The Canadian economy is firing on all cylinders,” said Omer Esiner, a senior foreign-exchange analyst in Washington at Travelex Global Business Payments, a currency-exchange network. “The market continues to digest the recent string of strong Canadian news.”

Governor Mark Carney signaled last week the central bank may raise interest rates as soon as June as inflation and growth outpace forecasts.

Government bonds were little changed. The yield on the 10- year security traded at 3.57 percent. The 3.75 percent security maturing in June 2019 rose two cents to C$101.44.

 

Source: businessweek.com