Loonie up on China data; shrugs off BoC decision

Tue Jan 17, 2012 10:58am EST
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar edged higher against the U.S. currency on Tuesday morning as investors largely shrugged off the Bank of Canada's decision to leave rates unchanged, and instead drew strength from upbeat economic news from China and Germany.

The Bank of Canada held its key overnight interest rate steady at 1 percent, and said a stronger second half of 2011 meant the economy should reach full capacity three months earlier than it had projected.

It gave no hints of a planned rate increase, repeating what it said in its December decision that there was considerable monetary policy stimulus in the economy and the overall outlook was little changed from October.

"The market, as well as the Bank of Canada, is interested in what's going on globally," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

"A muted reaction to the Bank of Canada's communique," he added.

Around 10:15 a.m., the Canadian dollar was at C$1.0145 to the U.S. dollar, or 98.57 U.S. cents, after climbing as high as C$1.0112, its strongest level since January 4.

The currency improved on its Monday finish of $1.0180 to the U.S. dollar, or 98.23 U.S. cents, supported by better fourth-quarter growth data from China and stronger economic sentiment in Germany.

The headlines also helped to lift broader investor sentiment and helped to send global stocks and the euro higher.   Continued...