Canadian Dollar Falls as Equity Decline Overshadows Conservative Majority

Canada’s dollar slid for a second day as a drop in global stocks overshadowed national election results that gave Conservative Prime Minister Stephen Harper a majority of seats in Parliament for the first time.

The loonie, as the currency is nicknamed, also fell as commodities dropped before a report tomorrow forecast to show U.S. supplies of crude oil rose to a six-month high last week. America is Canada’s biggest trading partner.

“The Canadian dollar has the tendency to be steered by global markets, and that’s what’s happening today,” said Mary Nicola, a currency strategist at BNP Paribas SA in New York.

The loonie depreciated 0.2 percent to 95.26 cents versus the greenback at 5:06 p.m. in Toronto, from 95.06 cents yesterday, after gaining as much as 0.5 percent and sliding 0.4 percent. One Canadian dollar buys $1.0498. The currency touched 94.46 cents on April 29, the strongest since November 2007.

The Standard & Poor’s 500 Index dropped 0.3 percent, and the S&P/TSX Composite Index slid 1.7 percent. Futures on crude oil, Canada’s biggest export, fell 2.4 percent to $110.85 a barrel on the New York Mercantile Exchange.

Tomorrow’s report from the U.S. Energy Department may show crude stockpiles climbed 2 million barrels from 363.1 million last week, according to the median forecast of 15 analysts in a Bloomberg News survey.

Canadian government bonds rose, driving the yield on the 10-year security down five basis points, or 0.05 percentage point, to 3.15 percent. The price of the 3.5 percent security maturing in June 2020 advanced 37 cents to C$102.72.

Election Results

Election results gave the Conservative Party a mandate to secure the economic recovery with additional tax cuts and erase the country’s deficit with curbs on government spending.

The victory ended seven years of minority governments and puts the Conservatives in firm control of the federal agenda for the first time since the early 1990s.

Harper pledged to balance Canada’s budget by 2014 after running record deficits during the recession even as he moves ahead with personal and corporate income tax cuts to help sustain the expansion.

The election results are “generally positive for the Canadian dollar,” said Firas Askari, head currency trader at Bank of Montreal in Toronto.