Dollar firms on solid data

Fri Dec 21, 2007 10:21am EST
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By John McCrank

TORONTO (Reuters) - The Canadian dollar firmed against the U.S. dollar on Friday, supported by economic data that was slightly above market expectations and showed the Canadian economy has so far held up well in the face of the economic morass created by the global credit crunch.

Domestic bond prices were lower after the data, as the figures may lessen the chance that the Bank of Canada will have to cut interest rates as aggressively as once thought in order to contain the damage from the slowdown.

At 10:06 a.m., the Canadian dollar was at US$1.0062, valuing each U.S. dollar at 99.38 Canadian cents, up from US$1.0001, or 99.99 Canadian cents to the U.S. dollar, at Thursday's close.

Canada's economy grew by 0.2 percent in October from September, fueled mainly by increases in manufacturing and wholesale trade, Statistics Canada said.

Market analysts had on average forecast the economy would grow by 0.1 percent.

"After October's decent, but certainly not stellar, GDP report, Q4 economic growth appears to be off to a reasonable start," said Jacqui Douglas, economics strategist at TD Securities in a note.

"Even if November and December GDP were to come in flat, Q4 GDP is still on pace for 1.4 percent annualized growth, which is rather impressive considering the slowdown in the U.S. and the massive appreciation in the Canadian dollar."

The Canadian dollar hit parity with the greenback for the first time in 31 years in September on the back of robust commodities prices, a strong domestic economy and a weakening greenback.   Continued...