Canadian Dollar Falls for Second Week

Canadian dollar fell for a second week against its U.S. counterpart as the biggest five-day decline in crude oil since August, reducing demand for assets related to economic growth.

The Canadian dollar fell against most of its counterparts on concerns that a recovery was stalled in the U.S., the nation's largest trading partner and a move by China to limit growth will encourage the Bank of Canada to keep borrowing costs low for a long period of time. Retail sales excluding autos in Canada grew at a slower pace in September, a government report is expected by economists to show.

"The key remains the U.S. economic outlook, and still is choppy," said David Watt, senior currency strategist at RBC Royal Bank of Canada unit of capital, by telephone from Toronto. "It's not like the U.S. will hit the escape velocity in the short term."

The Canadian currency depreciated by 0.4 percent to C $ 1.0168 per U.S. dollar yesterday, at $ 1.0123 on 12 November. One Canadian dollar buys 98.35 U.S. cents. The Canadian dollar as the currency is known by the image of waterfowl in the C $ 1 coin, touched C $ 1.0262 on 17 November, the lowest since Oct. 28. It slid 0.3 percent to C $ 1.3903 against the euro.

The Bank of Canada kept its key interest rate to 1 percent by the end of the second quarter, according to the median forecast of 22 economists surveyed by News this month. The October median forecast was for target up to 1.50 percent by then.

"Significant change"

"There has been a fairly remarkable," said Eric Lascelles, chief economics and rates strategist at TD Toronto-Dominion Bank Securities Unit by telephone from Toronto. "The Bank of Canada is perceived as sitting in waiting is not a useful thing for the currency."

Canadian retail sales excluding autos rose 0.3 percent in September after rising 0.4 percent in the previous month, according to the median forecast of 19 economists surveyed by our News. The report by Statistics Canada is scheduled to be released November 23.

A Department of Labor U.S. showed this week that consumer prices excluding food and fuel rose 0.6 percent last month from October 2009 to lower year on year increase since at least 1958.

Builders began work on the fewest homes since a record low hit in April 2009, the Department of Commerce. Canada sends about two-thirds of its exports to the U.S.

Outlook

The Canadian dollar weakened against the dollar on the prospect of a global economic slowdown. China ordered banks to set the largest reserves set aside for the second time in two weeks, effective drainage of the financial system to curb inflation and risks of the asset bubble in the fastest growing economy in the world.

Crude oil fell 3.9 percent to $ 81.60 a barrel in biggest weekly drop since Aug. 13 when it fell 6.6 percent. The MSCI World Index of developed world markets was little changed after falling 2.2 percent the previous week.

10-year bond fell to Canada this week, pushing the yield up 13 basis points, or 0.13 percentage point to 3.15 percent. The price of the 3.5 percent security maturing in June 2020 fell C $ 1.11 to C $ 102.90. The yield touched 3.16 percent this week, the highest since Aug. 13.

The Canadian dollar continues to be led by an increase of 3.6 percent this year against the dollar, which has suffered against its major counterparts as the Fed conducts quantitative easing to stimulate growth. The Fed announced $ 600 billion in purchases of bonds on 3 November.