Canadian dollar strengthens after Canada GDP, U.S. jobs eyed

Thu Jan 31, 2013 11:29am EST
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar notched gains after the release of stronger-than-expected domestic growth data on Thursday and was trading around equal value to its U.S. counterpart as market focus moved to a key U.S. jobs report out on Friday.

The Canadian dollar looked on track to gain 0.6 percent against the greenback this week, which would pare its losses for January to roughly three-quarters of a percent. The currency weakened last week after the Bank of Canada pulled back on its rate-hiking bias.

It was helped on Thursday by data that showed a bounce in domestic economic growth in November after several months of flat or tepid growth.

By mid-morning, the Canadian dollar was trading at C$0.9995 to the greenback, or $1.0005, compared with C$1.0015, or 99.85 U.S. cents, at Wednesday's North American close.

That gain could be threatened if U.S. jobs data due out on Friday comes in weaker than expected.

"The Canadian dollar is as vulnerable, if not more so, to U.S. economic weakness (as the U.S. dollar is)," said Jack Spitz, managing director of foreign exchange at National Bank Financial. "Ultimately if we see a soft payroll number tomorrow we could see some (U.S.) dollar strength against Canada."

Against the greenback, some of the Canadian currency's gain on Thursday could be attributed to month-end selling of U.S. dollars by fund managers with hedged portfolios following recent global equity gains, Spitz added.

Against the euro, it traded near the 13-month low it notched on Wednesday, illustrating the broader weakness of the Canadian dollar.   Continued...

A man holds the new Canadian 100 dollar bill made of polymer in Toronto November 14, 2011. REUTERS/Mark Blinch