C$ dives after weak Canada, U.S. GDP data

Fri Jul 29, 2011 10:18am EDT
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By Claire Sibonney

TORONTO (Reuters) - The Canadian dollar tumbled to its lowest level in more than a week against the greenback on Friday morning, while bond prices marched higher after Canadian and U.S. economic growth data fell below market expectations.

The currency fell as low as C$0.9590 versus the U.S. dollar, or $1.0428, from about C$0.9511, or $1.0514, immediately before the GDP data was released. It was the lowest level for the Canadian dollar since July 19.

Canada's gross domestic product unexpectedly fell by 0.3 percent in May, when the mining, oil and gas sectors battled bad weather and wildfires. Analysts had projected a 0.1 percent increase from April.

"I think it tends to overstate the weakness in the headline, but it certainly does speak to a second quarter that is shaping up to be fairly weak," said David Tulk, chief Canada macro strategist at TD Securities.

"We're also really nervous with what happened in the U.S. in terms of their really weak data print for GDP ... so I think this just gets painted with the same brush of fairly weak data as well as increased political risk that causes risk assets to retreat."

The U.S. economy grew at a meager 1.3 percent in the second and growth for the first quarter was revised sharply lower, data on Friday showed.

Figures that showed Canadian producer prices fell last month came in closer to consensus, and were largely ignored, Tulk said.

At 9:33 a.m., the Canadian dollar stood at C$0.9586 to the U.S. dollar, or $1.0432, down from Thursday's North American close at C$0.9516 to the U.S. dollar, or $1.0509.   Continued...