Canadian dollar posts three-week high as oil surges

Wed Nov 30, 2016 9:43am EST
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened against its firmer U.S. counterpart on Wednesday as oil prices jumped on prospects of an OPEC output cut and data showed the domestic economy grew in the third quarter at the fastest pace in more than two years.

Gross domestic product grew at an annualized 3.5 percent, slightly exceeding economists' expectations of 3.4 percent and picking up from a contraction of 1.3 percent in the second quarter, data from Statistics Canada showed.

"The Canadian dollar was getting a nice lift in any event from talk about an OPEC deal, that's the much bigger influence today, but on balance this is basically pushing on an open door and should provide some further support for the (Canadian) dollar today," said Doug Porter, chief economist at BMO Capital Markets.

Monthly data showed the economy grew 0.3 percent in September, which was also stronger than economists had expected.

"The three-tenths (gain) is setting you up for solid growth in the fourth quarter," said Paul Ferley, assistant chief economist at Royal Bank of Canada.

"It's going to reduce the prospect of any near-term easing by the Bank of Canada."

U.S. crude CLc1 prices jumped more than 7 percent to $48.54 a barrel as some of the world's largest oil producers agreed to curb oil output for the first time since 2008.

At 9:24 a.m. EDT (1424 GMT), the Canadian dollar CAD=D4 was trading at C$1.3405 to the greenback, or 74.60 U.S. cents, stronger than Tuesday's close of C$1.3437, or 74.42 U.S. cents.   Continued...

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch