June 29 (Bloomberg) -- Canada’s dollar slid to the lowest level in three weeks as concern over Europe’s fiscal woes and signs of a global slowdown drove investors away from higher- yielding assets like stocks and commodities.The Standard & Poor’s 500 Index sank below its 2010 closing low after a gauge of U.S. consumer confidence trailed economists’ estimates and concern grew that growth is slowing in China. The health of Europe’s banks may be revealed tomorrow when the European Central Bank offers them three-month loans before a landmark 12-month facility has to be paid back.
“There’s so much uncertainty now with the sovereign-debt crisis,” Aaron Fennell, a futures and currency broker at Lind- Waldock, a unit of MF Global Canada, said by phone from Toronto. “It’s like there’s this time bomb sitting in the economy and you don’t know when it’s going to go off.” Fennell is buying Canadian dollars on dips, and predicts it will trade between 93 and 98 U.S. cents.
The Canadian currency fell as much as 1.7 percent to C$1.0530 per U.S. dollar, the weakest level since June 8, before trading at C$1.0514 at 10:35 a.m. in Toronto, from C$1.0358 yesterday. One Canadian dollar buys 95.11 U.S. cents.
Canada’s currency is down 3.4 percent since March 31, poised for the first quarterly decline in more than a year.
‘Pure Risk-Off’
European banks on July 1 need to repay 442 billion euros ($540 billion), the biggest amount ever awarded by the ECB and a key plank in its efforts to fight the financial crisis last year. Demand for three-month cash tomorrow will expose how much banks still rely on the ECB for funding, investors and economists said.
The Conference Board’s confidence index for the U.S. slumped to 52.9 this month from a revised 62.7 in May, figures from the New York-based private research group showed today. The median forecast called for a decline to 62.5, and the gauge was lower than all projections in a Bloomberg news survey.
Crude oil, the nation’s largest export, declined as much as 3.4 percent. Canada’s dollar tends to rise and fall with stocks and commodity prices as a barometer for risk appetite. Crude is the nation’s largest export.
The drop in the Canadian dollar is “a pure risk-off move,” Adam Cole, head of global currency strategy at Royal Bank of Canada, the nation’s biggest bank, said by phone from London. “It’s not been a particularly violent move. It’s just been grinding lower.”
World’s Soundest
The Conference Board’s leading economic index for China, which overtook Germany as the world’s biggest exporter last year, rose 0.3 percent in April, less than the 1.7 percent reported June 15.
Canada’s benchmark two-year bond gained for a sixth day, the longest streak since May 6. The yield dropped 9 basis points, or 0.09 percentage point, to 1.412 percent. The price of the 1.5 percent security due in June 2012 gained 16 cents to C$100.17.
The loonie has gained 7.8 percent this year according to Bloomberg Correlation-Weighted Currency Indices, the second-best performance among its 10 developed-world counterparts as Europe’s sovereign-debt crisis burnished the allure of currencies backed by relatively strong balance sheets.
Canada, the last member of the Group of Seven industrialized nations to enter the global recession, was the first to recover, thanks partly to having the Group of Seven’s lowest debt-to-GDP ratio and the world’s soundest financial system, according to the World Economic Forum.
Canadian raw-material costs for factories tumbled in May, led by a decline in crude oil, while the prices of the goods manufacturers produced rose, government figures showed.The raw-materials price index fell 7.2 percent, the first drop in five months and the biggest since December 2008, as oil prices declined 14 percent, Statistics Canada said today in Ottawa. The index was expected to fall 1 percent, according to the median estimate in a Bloomberg survey of 11 economists.
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