2013.09.1105:39:49UTC+00Canadian Dollar touches 3 week high on Syria, economic growth

The Canadian dollar zoomed up for a third day, achieving a three-week high, as a Russian bid to get Syria to surrender its chemical weapons that may avert a U.S. attack lifted demand for riskier assets.

The currency emerge higher against the majority of its 16 most-traded counterparts even after Canada's federal housing agency announced housing starts in August recorded their sharpest decline in seven months. The currency acquired an increase in the previous two days versus its U.S. counterpart as data on building permits and employment growth surpassed analysts’ expectations. Yields on government 10-year bonds surge to a two-year high.

Bonds, Oil

Canada’s benchmark 10-year government bond fell, with yields rising seven basis points, or 0.07 percentage point, to 2.82 percent, the highest since July 2011. The 1.5 percent security maturing in June 2023 lost 56 cents to C$88.89.

‘Perfect Storm’

“It’s a perfect storm for Canadian dollar strength,” John Curran, a senior vice president at CanadianForex Ltd., an online foreign exchange dealer, said by phone from Toronto. “The main thing is the hangover from data on Friday and Monday, and the possibility of a Russian-backed solution for Syria has further strengthened the Canadian dollar.”

‘Avoid War’

“The Canadian dollar is trading in step with global sentiment on Syria,” Adam Button, a currency analyst at forexlive.com, said by phone from Montreal. “There’s a credible path to avoid war in Syria at the moment and that’s great news for the Canadian dollar.”

The cost to insure the Canadian dollar against declines versus its U.S. peer rose from its lowest point in more than five weeks. The three-month so-called 25-delta risk-reversal rate rose to 1.31 percent, after earlier dropping to 1.27 percent. Risk reversals measure the premium on options contracts to sell Canadian dollars versus buying U.S. contracts that do the opposite.

The loonie has dropped 1 percent in the past three months versus nine developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. The New Zealand dollar is the biggest winner in that period with a 3.5 percent rise while the Norwegian krone recorded the largest decline, at 2 percent.