The Canadian dollar rose against its US counterpart as crude oil, the nation's biggest export, pared a decline and the euro fell against most major currencies on concern Europe's debt crisis will slow economic growth.
Canada's currency, dubbed the loonie for the aquatic bird on the C$1 coin, gained as it ended the year trading on average above parity with its US counterpart for the first time in more than three decades. The Canadian dollar rose as institutional investors bought and sold currencies for year-end positioning.
"I would expect anyone positioning for 2012 would be lightening up on euro exposure and adding to other exposure, especially that of strong sovereigns like Canada," said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto. "It's always good to start off the year positioned the way you want to be."
The loonie rose 0.2 per cent to C$1.0180 (Dh3.65) per US dollar in Toronto on Friday, after earlier falling 0.2 per cent. It touched C$1.0126 two days earlier, the strongest since Dec-ember 8. One Canadian dollar buys 98.23 US cents. Canada's dollar rose 0.3 per cent against the euro after Friday reaching its highest level since January. Canada's dollar maintained an average of 98.92 Canadian cents per US dollar in 2011, according to daily closing prices, the highest annual value since 1976, when it traded at 98.63 Canadian cents, according to Bloomberg data.
The loonie is the fourth-worst performer this year after the euro, Sweden's crown and the Norway's crown among the ten major currencies tracked by Bloomberg Correlation Weighted Indexes.
The Standard & Poor's 500 Index declined 0.3 per cent. Futures on crude oil declined 0.7 per cent to $98.99 a barrel in New York after earlier falling 1.2 per cent.
Europe's shared currency dropped below 100 yen for the first time since June 2001 after Spain said its budget deficit will reach eight per cent of gross domestic product this year, more than the previous forecast of six per cent. Luxembourg's Jean- Claude Juncker, who leads the group of euro-area fin-ance ministers, said econ-omic growth in the euro region ‘isn't good' and the world economy is growing only in some Asian and African countries.
Implied volatility for one-month options on the Canadian dollar versus the greenback rose for a sixth day to as high as 11.1 per cent, the most since December 16. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency. The measure has averaged ten per cent this year.
Canada's benchmark five-year bond was little changed, with the yield rising one basis point, or 0.01 percentage point, to 1.27 per cent as the price of the 2.75 per cent security due in September 2016 decreased to C$106.68. Canadian five-year bonds yielded 44 basis points above equivalent-maturity US securities. The so-called spread hit 33 basis points last week, the narrowest this year. It was as wide as 77 basis points in July.
The nation's government bonds have returned 9.6 per cent this year, the most since 2008, according to Bank of America Merrill Lynch data.
Canada's currency fell 0.1 per cent last month and two per cent last year against its US counterpart. It strengthened to 94.07 cents per US dollar, a more than three-year high, on July 26 and weakened to C$1.0658 on October 4.
It will depreciate to C$1.04 by the end of the first quarter before rebounding by year-end, according to median forecasts of analysts and economists in a Bloomberg survey. Those forecasts compared with C$1.02 and 98 Canadian cents at the end of November.