FOREX TRADING

Canada’s currency dropped after the country’s biggest phone company, BCE Inc., announced that the $42.4 billion takeover was not going to close on December 11 as originally planned, causing the company’s stock to also weaken 34 percent. Said Richard Briggs, the vice president of MF Global Canada & Co., a unit of MF Global Ltd., “The Bell deal is disruptive. When a leading stock drops more than 30 percent that affects your currency.” The Canadian dollar weakened 1.3 percent from $1.2248 to $1.2414. It traded at $1.2303 and right now it buys 81.29 American cents.

This is the sixth straight month of decline for the Canadian dollar, the longest losing streak the currency has suffered in 15 years. Commodity prices, such as crude oil, also plummeted, contributing to the currency’s decline as the country relies on raw materials for close to a third of its export revenue. BCE is supposed to be bought out by Providence Equity Partners Inc., Madison Dearborn Partners LLC with banks Citigroup Inc. and Royal Bank of Scotland Group Plc providing financing. According to a spoke person from KMPG, BCE would have to be declared insolvent if they go through with the deal under the current terms with the market conditions being what they are.

“The Canadian dollar definitely started slipping as the news broke,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “[There is] speculation that Canadian dollar buying related to the deal may not occur or may have to be reversed.” KPMG will have to provide BCE with a ‘favorable opinion’ by the December 11th date or else the transaction probably won’t go forward. BCE will also have to meet solvency requirements in order for the deal to be closed according to the current terms of the agreement.

The Canadian dollar – also known as the loonie due to the aquatic bird on the country’s one dollar coin – stretched its decline after a government report released last month showed that orders for American durable goods fell more than twice as much as what was forecasted. Said Jack Spitz, the managing director of foreign exchange at the National Bank of Canada in Toronto, “The potential for a significant move higher in the U.S. dollar versus the Canadian dollar is the dominant bias.” His statement was based on the BCE news and “position squaring” before tomorrow’s U.S Thanksgiving holiday. ?