C$ gains with solid GDP data, up 0.4 percent for week

Fri Sep 30, 2016 5:03pm EDT
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday as its economy grew more than expected in July, but its muted gains over a week in which oil prices surged raised questions about the currency's ability to further appreciate.

Canada's gross domestic product grew 0.5 percent in July, fueled by a rebound in oil and gas extraction after wildfires in Alberta earlier this year, Statistics Canada data showed. The economic growth topped analysts' forecasts for a gain of 0.3 percent.

"All in all a solid report ... it should definitely push back against some of the recent pessimism we see in the market," said Andrew Kelvin, senior rates strategist at TD Securities.

The currency's muted response to that data and the sharp weekly gain in the price of oil, a major Canadian export, raised concerns for Adam Button, a currency analyst at ForexLive in Montreal.

"The inability of the Canadian dollar to make any kind of significant gain on Friday despite a stellar GDP report is a worrisome sign," he said, calling the loonie "extremely vulnerable".

The currency CAD=D4 settled at C$1.3117 to the greenback, or 76.24 U.S. cents, stronger than Thursday's close of C$1.3149, or 76.05 U.S. cents. Its strongest level of the session was C$1.3088, while its weakest was C$1.3195.

It rose 0.4 percent over the week, while U.S. crude prices were up about 7 percent, helped by Wednesday's announcement of an OPEC deal aimed at removing some production from an oversupplied market.

On Tuesday, the loonie hit its weakest in nearly six months.   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