Canada’s Dollar Declines as Crude Oil Falls on European Debt Concern

Canada’s dollar fell for the first time in three days against its U.S. counterpart on concern European nations may have difficulty repaying their debt, discouraging demand for higher-yielding assets.

The Canadian currency dropped against half of its 16 most- traded peers as crude oil fell. The Canadian dollar is underperforming today after rising versus its commodity-related peers such as the Australian dollar earlier this month.

“The focus will remain in Europe,” said Camilla Sutton, chief currency strategist at Bank of Nova Scotia’s Scotia Capital unit in Toronto, in an e-mail message. “The sovereign crisis appears to be entering a more dangerous stage. The Canadian dollar seems to have borne the brunt today.”

Canada’s currency depreciated 0.8 percent to C$1.0181 per U.S. dollar at 10:17 a.m. in Toronto. One Canadian dollar buys 98.22 U.S. cents.

The Canadian dollar fell as Italian borrowing costs increased at a five-year note sale today. Italy sold the securities at a yield of 6.29 percent, up from 5.32 percent at the previous auction and the highest since June 1997. Mario Monti sought to form a new government in Italy to restore investor confidence in public finances.

The loonie, as the Canadian currency is known, gained 1.4 percent against the Australian dollar in November, third most after the Swiss franc at 1.6 percent and New Zealand dollar at 1.7 percent.

The Standard & Poor’s 500 Index decreased 0.5 percent. Futures on crude oil, Canada’s biggest export, fell 0.8 percent to $98.017 a barrel.

Government bonds were little changed. The benchmark 10-year yield held steady at 2.13 percent after falling three basis points last week. The price of the 3.25 percent security maturing in June 2021 fell 3 cents to C$109.65.

Canada’s sovereign debt has returned 8.1 percent in 2011, compared with 8.6 percent for U.S. Treasuries, according to Bank of America Merrill Lynch data.