Canadian Dollar Strengthens on Speculation of Flows From Japan

The Canadian dollar strengthened against the U.S. dollar for the third day as investors seek higher-yielding currencies of commodity-exporting nations.

The loonie, as the currency is nicknamed, gained on speculation heightened demand from Japan for cross-border assets will result from a stimulus package announced last week by Bank of Japan Governor Haruhiko Kuroda. The Australian and New Zealand dollars also advanced.

“The market is wondering where does this Bank of Japan liquidity end up,” said Adam Cole, head of Group of 10 currency strategy in London at Royal Bank of Canada. “Canada has been left behind a bit because of the lower yield and the Bank of Canada’s reluctance to raise interest rates.”

The loonie gained 0.1 percent at C$1.0157 per U.S. dollar at 8:58 a.m. in Toronto. One loonie buys 98.45 U.S. cents.

Kuroda, who took over as Bank of Japan governor in March, said April 4 the central bank will double monthly bond buying to 7.5 trillion yen ($76 billion), while suspending a cap on holdings. He said today that while policy makers will continually monitor whether additional stimulus is needed, steps taken last week are sufficient to achieve the bank’s 2 percent inflation goal.

The Canadian dollar has lost 0.6 percent this year against nine other developed-nation currencies tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar gained 2 percent and the euro rose 1.1 percent.