GDP data lifts Canadian dollar to 3-1/2 year high; eyes on BoC

Mon Feb 28, 2011 5:03pm EST
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By Ka Yan Ng

TORONTO (Reuters) - Canada's dollar jumped to its highest level against the U.S. dollar since November 2007 on Monday after fourth-quarter GDP data topped expectations and backed predictions that the Bank of Canada will resume interest rate hikes in the first half of the year.

Annualized GDP growth in the quarter was 3.3 percent, boosted by surging exports and strong consumer spending, Statistics Canada said.

Statscan also revised third-quarter GDP growth to 1.8 percent from 1.0 percent. Economists polled by Reuters had expected annualized growth of 3.0 percent in the fourth quarter.

Bank of Canada Governor Mark Carney had conceded earlier this month that the bank's January forecast of 2.3 percent growth in the fourth quarter was likely short of the mark, suggesting the export strength was a surprise.

"It's certainly above market expectations, but more importantly above the BoC's expectations," said Jonathan Basile, economist at Credit Suisse in New York.

The currency rose as high as C$0.9710 to the U.S. dollar, or $1.0299, its firmest level since November 2007.

It finished mildly off the session high at C$0.9714 to the U.S. dollar, or $1.0294, up three-quarters of a cent from Friday's North American finish of C$0.9787 to the U.S. dollar, or $1.0218.

Few technical barriers stood in the currency's path as it surged to the highest levels reached before the global financial crisis.   Continued...