C$ gains, near one-week high, on data and ECB move

Thu Sep 4, 2014 9:38am EDT
 
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By Leah Schnurr

TORONTO (Reuters) - The Canadian dollar firmed to its highest in nearly a week against the greenback on Thursday, rising along with investors' risk appetite after the European Central Bank cut interest rates to record lows to spur growth and thwart a deflation threat.

The loonie got an additional boost from data that showed the country's trade surplus jumped in July to a nearly six-year high as exports rose. The report sent the loonie to a fresh session high.

"The trade number was very impressive," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada in Toronto.

Policymakers are looking for the struggling export sector to become a bigger driver of Canadian economic growth, taking over from the boom in household debt.

Chandler expects the Bank of Canada will have to revise its growth forecasts higher at its next meeting in October.

"We've got a full percentage point stronger growth in the third quarter than the bank was last monitoring, so if we're correct, it's going to see a revised forecast," he said.

"I would like to see them say at that point they have a tightening bias going forward, talk about an eventual removal of monetary accommodation, but they've been reluctant to do so in the past."

The currency had surged heading into the report after the ECB cut its main refinancing rate to 0.05 percent and launched a new program to pump money into the euro zone economy. The Canadian dollar firmed against its other major currency crosses, and was strongly higher against the euro.   Continued...