The FINANCIAL — Canada's dollar staged its biggest five-day rally since October after central banks including the Bank of Canada took steps last week to make it cheaper for lenders to borrow dollars during emergencies, told gulfnews.
The Canadian dollar touched a two-week high on Friday as speculation about a possible European lending plan involving the International Monetary Fund buoyed demand for higher-yielding assets. Bank of Canada Governor Mark Carney is forecast to keep his key interest rate at one per cent on Tuesday, three days before European Union leaders meet in Brussels to discuss proposals aimed at progressing toward fiscal union.The loonie, as the currency is also known for the image of the aquatic bird on the C$1 coin, gained 2.6 per cent last week to C$1.0195 per US dollar in Toronto, its biggest weekly climb since October 14. Canada's dollar, the world's seventh-most-traded currency, declined 1.6 per cent in November.
One Canadian dollar buys 98.09 US cents.Economists predicted no changes to Canadian interest rates until October 2012 at the earliest, even with inflation having exceeded two per cent for 11 straight months. The Fed has pledged to hold rates steady until at least mid-2013, while the ECB cut borrowing costs this month.
Canadian employment unexpectedly fell for a second month in November, the first time since the 2009 recession that the economy registered back-to-back job losses.
Payrolls fell by a net 18,600 last month, following October's 54,000 drop that was the largest since February 2009, Statistics Canada said Friday in Ottawa. The unemployment rate also rose for a second month, to 7.4 per cent from 7.3 per cent. None of the 23 economists surveyed by Bloomberg predicted a job loss, and the median estimate was for the unemployment rate to be unchanged.
European leaders will meet in Brussels on Friday in an attempt to contain a debt crisis that drove yields on Spanish and Italian debt to euro-era records last month. A European proposal to channel central-bank loans through the IMF may deliver as much as ¤200 billion to fight the debt crisis, two people familiar with the negotiations said last Friday.
French President Nicolas Sarkozy said last Wednesday the euro area must converge economically, and German Chancellor Angela Merkel said on Friday the bloc needs a fiscal union, boosting optimism the two are nearing an agreement.Stocks and riskier assets such as commodities soared on Thursday after central banks led by the Federal Reserve agreed to cut the premium banks pay to borrow dollars overnight from central banks by half a percentage point to 50 basis points.
A basis point is equal to 0.01 percentage point. The so-called dollar swap lines will be extended by six months to February 1, 2013. The European Central Bank and its counterparts from Switzerland, Japan and the UK were also part of the coordinated response.Canadian government bonds fell last week, pushing the benchmark ten-year yield up two basis points to 2.12 per cent. It decreased to a record low 1.99 per cent on October 4. The price of the 3.25 per cent securities maturing in June 2021 declined 21 cents to C$109.73.
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