2013.09.1205:13:23UTC+00Canadian Dollar surges on stronger economic outlook against U.S.

Canada's dollar advance for a fourth day, the longest streak of advances since July, as traders re-evaluated bets the nation’s economy would trail the U.S.’s in light of recent data that’s shown an above estimated development.

The currency reached an almost four-week high against its U.S. counterpart as President Barack Obama delayed his decision regarding military strikes against Syria to analyze a diplomatic solution to that country’s alleged chemical-weapons use, lifting riskier assets. Canada’s dollar strengthened past its 100-day moving average after data last week showed the economy made triple the jobs analysts estimate in August while U.S. payroll growth was less than forecast.

Bonds, Oil

Canada’s benchmark 10-year government bond rose, with yields rising three basis points, or 0.03 percentage point, to 2.79 percent after touching 2.83 percent, the highest since July 2011. The 1.5 percent security maturing in June 2023 gained 27 cents to C$89.16

‘Squeezing’ Bears

“That bearish story was really well priced in,” said Sebastien Galy, a senior currency strategist at Societe Generale SA, by phone from New York. Positive developments in Syria and with Canada’s economy showed sentiment had grown too negative on the Canadian dollar, he said, and “now basically we’re squeezing these bears.”

Implied volatility for three-month options on Canada’s dollar versus its U.S. counterpart rose from its lowest in seven weeks, to 6.76 percent. Earlier it fell to 6.64 percent, the lowest since July 23. The average for this year is 6.8 percent. The measure is used to set option prices and gauge the expected pace of currency swings.

The loonie has dropped 0.6 percent this year against nine developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. The Australian, Japanese and Norwegian currencies are the only other decliners this year, while the U.S. dollar has gained 3.8 percent.

“We’ve seen quite positive fundamentals coming out of Canada,” Eimear Daly, a currency-market analyst at Monex Europe Ltd., said by phone from London. “There was a lot of talk that temporary factors in the Canadian economy would see a meatier bottom-out, but that actually hasn’t come through in data, and it looks like for now there could be quite a rebound already.”