The Canadian dollar climbed to its best performance mark in a month in the middle of assumptions that the U.S. Federal Reserve won’t put an early end to its expansionary financial policy, lifting riskier assets. The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, advance the most in more than a week against the greenback as the exit of former U.S. Treasury Secretary Lawrence Summers from the race to lead the Fed damped bets financial easing will come to an end sooner than expected. The Fed starts a two-day meeting tomorrow during which policy makers may decide to slow asset purchasing. Government-bond yields pulled back the most in a week. Bond Reversal Benchmark 10-year government bonds slid after surging earlier, pushing the yield on the security up two basis points, or 0.02 percentage point, to 2.78 percent. It relinquished as low as 2.69 percent. The price of the 1.5 percent debt due in June 2023 diminished 12 cents to C$89.23. ‘Oversold’ Greenback The U.S. dollar is “oversold and poised to reverse” versus the loonie, Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, wrote today in a client note. The Canadian dollar will bounce off C$1.0275 per dollar and weaken to at least the zone from C$1.0335 to C$1.04, he said. Risk Reversals The three-month so-called 25-delta risk-reversal rate, which measures the premium charged for the right to purchase the U.S. dollar versus its Canadian counterpart against contracts to sell, hike to 1.34 percent, the highest in almost two weeks. The measure developed to 1.64 percent on Aug. 23, the topmost mark on a closing basis since July 2. The 2013 average is 1.26 percent. Trading in over-the-counter options for the U.S. dollar-Canadian dollar pair amounted to $775 million, making up 5.3 percent of the $15 billion daily total. Greenback-loonie exchanging was 70 percent more than the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis. The loonie diminished 2.6 percent in the past year against nine other developed-nation currencies tracked by the Bloomberg Correlation-Weighted Index, making it the third-worst performer. The yen lost 20 percent, and the Australian dollar backslide 8.9 percent. The U.S. dollar rallied 3.8 percent.
