Canadian dollar falls from near-parity to U.S.$ after GDP

Tue Jul 31, 2012 9:46am EDT
 
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar touched a session low against its U.S. counterpart on Tuesday, retreating from an 11-week high in striking distance of parity after domestic growth data showed the economy grew by less than expected.

Canada's economy grew by 0.1 percent in May from April as weak manufacturing and construction activity partially offset strength in natural resources and some services industries.

The Canadian currency fell as low as C$1.0044 versus the greenback, or 99.56 U.S. cents, from about C$1.0029 just before the data's release.

Analysts in a Reuters poll had forecast, on average, 0.2 percent growth in gross domestic product in May, following an expansion of 0.3 percent in April.

Still, the data was not seen having a big impact on the Bank of Canada, which is expected to keep interest rates on hold until the third quarter of next year. <CA/POLL>

"Remember they were already calling for a fairly mediocre second quarter in their downgraded outlook," said Avery Shenfeld, chief economist for CIBC World Markets.

"If anything they may be slightly on the high side of what looks reasonable. This won't be far off their projection. It's simply too slow to be thinking of raising interest rates any time soon."

At 9:30 a.m. EDT (1330 GMT), the Canadian dollar stood at C$1.0035 versus the greenback, or 99.65 U.S. cents, softer than Monday's North American session close at C$1.0018 against the greenback, or 99.82 U.S. cents.   Continued...