Canadian Currency Advances to Strongest Level in Seven Months

May 21 (Bloomberg) -- Canada’s dollar rose for a fourth day, touching the strongest level since October, as its U.S. counterpart weakened against most major currencies.

“It’s part of the general move against the U.S. dollar,” said Meg Browne, a currency strategist at Brown Brothers Harriman & Co. in New York. “It looks like this is going to continue.”

The Canadian currency gained 0.4 percent to C$1.1374 per U.S. dollar at 5 p.m. in Toronto, from C$1.1418 yesterday. One Canadian dollar buys 87.92 U.S. cents. The loonie, as Canada’s currency is known, touched C$1.1349, the strongest level since Oct. 14.

The U.S. dollar fell today against all of the 16 most- traded currencies tracked by Bloomberg except the Brazilian real and Mexican peso as an increase in Treasury yields and gold prices indicated inflation may accelerate while the U.S. budget deficit widens. The greenback is the worst-performing major currency this month.

The markets are beginning to anticipate the possibility of the U.S. losing its AAA credit rating “eventually,” said Bill Gross, the co-chief investment officer of Pacific Investment Management Co., in an interview on Bloomberg Television.

Canada’s dollar surged 14 percent after reaching a four- year low on March 9 as investors stepped out of havens to seek higher-yielding assets such as stocks and commodity-linked currencies.

No Quick Turnaround

“Looking at momentum indicators, it doesn’t look like this move is going to turn around any time soon,” said BBH’s Browne. “The U.S. dollar may extend declines into next week.”

The 14-day relative strength indicator for the U.S. dollar against the Canadian dollar stood at 31.4. Readings below 30 and above 70 indicate a reversal may occur.

“Overall I’m fairly constructive longer term on the Canadian dollar,” said Jonathan Gencher, Toronto-based director of currency sales at BMO Capital Markets. The trend for the U.S. dollar versus the loonie is “biased to the downside.”

The yield on the 10-year Canadian government bond climbed as much as 15 basis points, or 0.15 percentage point, to 3.29 percent, the highest since Dec. 1. The price of the 3.75 percent security maturing in June 2019 fell C$1.13 to C$104.07.