Canadian dollar firms as economic data weighs on greenback

Mon Mar 28, 2016 4:31pm EDT
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday as economic data weighed on the greenback, while Canada's finance minister expressed optimism that deficit spending will spur domestic economic growth.

The Canadian dollar CAD=D4 settled at C$1.3181 to the greenback, or 75.87 U.S. cents, stronger than Friday's close of C$1.3240, or 75.53 U.S. cents.

The U.S. dollar .DXY hit its lowest level against a basket of six major currencies since last Wednesday after a deep downward revision to U.S. consumer spending for January.

"The revision to consumer spending numbers in January gives the market a bit of concern in terms of future rate hikes from the Federal Reserve," said Scott Smith, a senior market analyst at Cambridge Global Payments.

In addition, U.S. consumer spending rose only slightly in February and inflation retreated, suggesting the Fed could remain cautious about raising interest rates this year.

Meanwhile, Canada's Liberal government believes the federal budget will be balanced in "about" five years due to higher growth spurred by deficit spending, Finance Minister Bill Morneau said on Sunday.

The government gave no target date for eliminating the deficit when it unveiled the budget last week.

The stimulus budget, combined with a modest recovery in oil and non-commodity exports, makes it likely the Bank of Canada's next move will be an interest rate hike rather than a cut.   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