The currency extended a weekly advance against its U.S. peer as Canada’s growth has picked up along with the American economy, which grew at a 4.2 percent annualized second-quarter pace, the Commerce Department said yesterday from Washington. Bank of Canada Governor Stephen Poloz has said it will take another two years to use up slack that built up in the world’s 11th largest economy.
“Even though the headline data came in stronger than the market was expecting, it wasn’t that much stronger that it’s going to cause the Canadian dollar to appreciate too much,” David Bradley, director of foreign exchange trading at Scotia Capital Inc., a unit of Bank of Nova Scotia, said by phone from Toronto. “We had a little bit of a move down to the lows we’ve seen recently” for the U.S. dollar, he said.
The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, rose 0.2 percent to C$1.0844 per U.S. dollar at 9:04 a.m. in Toronto. It touched C$1.0831 after climbing to C$1.0829 on Aug. 27, the strongest since July 29.
The loonie’s weekly gain of 0.9 percent gave it a monthly advance to 0.6 percent. It’s still down 1.6 percent this quarter and 2 percent year-to-date.
The yield on Canada’s benchmark 10-year bond rose to 2.01 percent after touching 1.979 percent yesterday, the lowest since May 2013. It’s down from a 2014 high of 2.80 percent on Jan. 2.
Canada’s gross domestic product rose at a 3.1 percent annualized pace from April to June, Statistics Canada said today in Ottawa, faster than the 2.7 percent economists forecast in a Bloomberg survey. Exports surged 17.8 percent on gains in automobiles, farm and forest products, and household expenditures gained 3.8 percent.
Poloz said Aug. 25 that persistent slack in the country’s labor market and a tendency toward part-time job creation means the central bank has the scope to keep its main interest rate at 1 percent, near historic lows, even if employment picks up.
The Canadian data followed U.S. economic-growth figures that were revised up yesterday from an initial estimate of 4 percent, and following a first-quarter contraction.
“North America in general benefits from a U.S. economic recovery,” Omer Esiner, chief market analyst at currency brokerage Commonwealth Foreign Exchange Inc. in Washington, said in a phone interview. “But it’s still a buy-on-dip situation for USD-CAD. I can see the pair going up to C$1.15.” It last touched C$1.15 in July 2009.