Canada's Dollar Gains


Canada's dollar rose the most in two weeks on speculation the U.S. Federal Reserve's rate-cutting cycle is close to an end.

The Canadian dollar strengthened against the 16 most-traded currencies. Traders said a conclusion of the Fed's rate reductions would reduce pressure on the Bank of Canada, which has cut borrowing costs four times since December to shield the economy from a slowdown in the U.S., the nation's largest export market.

Canada's dollar increased 0.8 percent to C$1.0051 per U.S. dollar at 9:36 a.m. in Toronto, from C$1.0126 yesterday. One Canadian dollar buys 99.53 U.S. cents.

The U.S. central bank has cut its fed funds target 3 percentage points since September to avert a recession and spur lending. Futures on the Chicago Board of Trade show a 78 percent chance the Fed will cut the target rate for overnight lending by a quarter-percentage point to 2 percent today, and 66 percent odds the rate will be held at that level in June.

The Canadian central bank cut its key rate a half- percentage point to 3 percent on April 22, to revive an economy that's growing at its slowest pace in 16 years, and signaled more reductions may be needed.

Traders have reduced bets on Bank of Canada rate cuts. The yield on bankers' acceptances futures contracts for September was 2.93 percent today, up from 2.82 percent a month ago. The futures have settled at a three-month lending rate averaging 16 basis points above the central bank's target since Bloomberg started tracking the data.

The yield on Canada's benchmark 10-year government bond fell 4 basis points, or 0.04 percentage point, to 3.66 percent. The price of the 4 percent security due June 2017 rose 29 cents to C$102.64. A basis point is 0.01 percentage point.


TradingEconomics.com, Bloomberg
4/30/2008 7:49:15 AM