Canada dollar drops on weak GDP data

Mon Apr 30, 2012 4:46pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar stumbled against its U.S. counterpart and domestic bond yields retreated on Monday after data showed the economy unexpectedly shrank in February, cooling expectations that the Bank of Canada will soon resume raising interest rates.

Canada's gross domestic product contracted by 0.2 percent in February from January, data showed, surprising analysts who had expected a 0.2 percent increase.

"Blood and guts all over the street today," said Steve Butler, managing director of foreign exchange trading at Scotiabank, of the move in the Canadian currency.

"The market was expecting maybe a little bit of a disappointment on the GDP and we got a lot of disappointment."

He added he was a little surprised by the market's strong reaction, but said month end flows could be exaggerating the move.

The Canadian currency also tracked a fall in global stock markets on data showing Spain slipped into recession and the U.S. economy appeared to be slowing.

The Canadian dollar finished at C$0.9879 versus the U.S. dollar, or $1.0122, down from Friday's finish at C$0.9810 versus the U.S. dollar, or $1.0194.

The Canadian dollar, which hit seven-month high on Friday, was still up 1 percent for the month, its best monthly gain since February.   Continued...

Canadian loonies, one dollar coins, are displayed in this posed photograph in Toronto, October 10, 2008. REUTERS/Mark Blinch