Barcelona (ACN).- The Catalan economy stopped the fall in GDP during the second quarter of 2013 recording a 0.0% growth, according to figures released on Wednesday by the Catalan Finance Ministry and Catalonia’s Statistics Institute (Idescat). In the past nine months the decrease of the GDP level has been gradually reduced. In the fourth quarter of 2012 Catalonia’s GDP was reduced by 0.7%, this figure for the first quarter of this year was 0.1%, meanwhile for the second quarter the rate has stabilised with a 0.0% growth...
Canada’s dollar fell to its lowest level in six weeks as a report showed retail sales shrank more than forecast in June, adding to evidence that economic growth is slowing.
The currency slid versus its U.S. peer for a fifth day, the longest slump in two months. The drop in sales, which rose in May the most since 2010, followed declines in Canadian wholesale and manufacturing sales in June and a surprise loss of jobs last month, along with the first contraction this year in the Ivey purchasing-managers index. Inflation stayed in July below the central bank’s target for a 15th month, data may show tomorrow.
“The retail sales are just icing on the cake for the loonie,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC, by phone from New York. “The retail-sales number along with the Ivey and jobs data and wholesale sales figures kind of suggest the Canadian economy faces headwinds, not unlike other developed-market economies, so that is going to be somewhat weighing on the loonie.”
The loonie, as Canada’s currency is nicknamed for the image of the aquatic bird on the C$1 coin, depreciated 0.4 percent to C$1.0516 per U.S. dollar at 5 p.m. in Toronto. It touched C$1.0531, the weakest intraday level since July 10. One Canadian dollar buys 95.09 U.S. cents.
Canada’s currency approached a technical level that suggested it may soon strengthen. The 14-day relative-strength index versus the greenback decreased to 35, moving toward the 30 level some traders consider a sign an asset has lost too much, too quickly, and is about to change direction. The last time the loonie fell below 30, on March 6, it gained 1.9 percent in the next month.
The Canadian 10-year government bond yield declined one basis point, or 0.01 percentage point, to 2.74 percent after climbing three basis points earlier to a two-year high of 2.78 percent. The price of the benchmark 1.5 percent security maturing in June 2023 added 9 cents to C$89.44.
A Bloomberg survey forecast the yield would trade at 2.75 percent in March 2014 after ending 2013 at 2.60 percent. The estimates were the weighted averages of the projections of 22 analysts and economists. They also forecast the yield would rise to 2.89 percent by June and 3.21 percent by year-end 2014.
The Bank of Canada said it will auction C$3.4 billion ($3.2 billion) of five-year bonds on Aug. 28. The 1.25 percent securities mature in September 2018.
Canada’s dollar slid yesterday after minutes of the Federal Reserve’s last meeting showed most policy makers were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing monetary stimulus this year if the economy improves.
The American central bank’s asset purchases, which fueled growth in riskier assets, have raised concern they would lead to inflation and debase the U.S. dollar. Investors are betting slower bond buying will cause the greenback to strengthen against its Canadian peer.
“We saw a selloff across risk assets,” said Mazen Issa, Canada macro-strategist at Toronto-Dominion Bank’s TD Securities unit, by phone from Toronto. “It fits into our general expectation for just a weaker Canadian dollar.”
The loonie fell today against the majority of its 16 most-traded peers as Statistics Canada said retail sales dropped 0.6 percent to C$40.1 billion ($38.2 billion). Flooding in Alberta and a construction strike in Quebec contributed to the slide, the agency said. Economists surveyed by Bloomberg News forecast a 0.4 percent decrease. Sales rose a revised 1.8 percent in May.
“This is the third straight significant miss on the June activity numbers, setting us up for next week’s June GDP and second-quarter GDP numbers, and obviously the Canadian economy stumbled pretty significantly at the end of the quarter,” said David Watt, chief economist at the Canadian unit of HSBC Holding Plc. The Bank of Canada may be “locked on the sidelines for an extended period of time.”
The central bank has kept its benchmark interest-rate target at 1 percent since September 2010 to support the economy.
Canada’s gross domestic product increased 1.6 percent in the second quarter while slipping 0.5 percent in June, economists forecast before data due Aug. 30. Consumer prices rose 1.4 percent last month from a year earlier, a Bloomberg survey forecast before a report tomorrow. The central bank’s inflation target is 2 percent.
The loonie weakened even as futures on crude oil, Canada’s largest export, gained 1.3 percent to $105.20 per barrel in New York, after touching an almost two-week low yesterday.
Options traders were the most bearish on the Canadian dollar in six weeks. The three-month so-called 25-delta risk reversal rate, which measures the premium charged for the right to buy the U.S. dollar against its Canadian counterpart versus contracts to sell, rose to 1.65 percent, the highest level on a closing basis since July 8. The 2013 average is 1.25.
Implied volatility for three-month options on the Canadian dollar versus its U.S. counterpart increased to 7.9 percent, the highest since July 16. Implied volatility is used to set option prices and gauge the expected pace of currency swings. The average for this year is 6.8 percent.
The loonie fell 0.8 percent in the past week against nine other developed-nation currencies tracked by the Bloomberg Correlation Weighted Index. The New Zealand dollar and the Norwegian krone dropped more, losing 2.6 percent and 2.4 percent. The U.S. dollar gained 1.2 percent.
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