Canadian Dollar Trades Within 2 Cents of Parity Before Central Bank Meets

Canada’s dollar traded within two cents of parity with the greenback before tomorrow’s Bank of Canada meeting as stocks fell and government bond yields slid to record lows on concern Europe’s debt crisis is worsening.

The currency, called the loonie, erased losses after an index of service industries in the U.S., Canada’s biggest trade partner, unexpectedly rose. The loonie fell in August on concern a slowing global economy will crimp Canada’s exports. Futures indicate odds are about even Bank of Canada Governor Mark Carney will cut borrowing costs by year-end after data showed last week the nation’s economy unexpectedly shrank in the second quarter.

“The market is taking a cautionary tone until we get data from the Bank of Canada tomorrow,” Steve Butler, managing director of foreign-exchange trading at Bank of Nova Scotia’s Scotia Capital, said by phone from Toronto. “The Canadian dollar has hung in quite well, but at some point this week I think we will probably drift back toward parity given that the market right now doesn’t want to know about risk.”

The Canadian currency gained 0.1 percent to 98.95 cents per U.S. dollar at 2 p.m. in Toronto, compared with 99.07 cents yesterday. Earlier it weakened as much as 0.6 percent. One Canadian dollar buys $1.0106. The currency last traded on a one- for-one basis with the greenback Aug. 9.

The loonie rose against the euro and New Zealand’s dollar.

“We see a fair amount of corporate interest to buy Canada at these levels,” said Butler.