The Canadian dollar was higher Friday as the economy expanded at a faster than expected pace in June and traders were confident the Federal Reserve is ready to take further action to maintain the fragile U.S. economic recovery.
The loonie was up 0.72 of a cent at 101.5 cents (U.S.) after Statistics Canada said gross domestic product increased by 0.2 per cent, against the 0.1 per cent rise that economists had expected. This translated into a 0.5-per-cent gain for the second quarter with growth helped along by rising business investment.
The agency reported that GDP expanded at an annual rate of 1.8 per cent in the April-June period, slightly better than the 1.7 per cent pace recorded in the U.S.
Meanwhile, traders also took in a much-anticipated speech by U.S. Federal Reserve chairman Ben Bernanke, who told an audience at the central bank’s retreat in Jackson Hole, Wyo., that the Fed will act to promote growth as needed to help an economy that is “far from satisfactory.”
Hopes for further stimulus rose sharply after the release last week of minutes from the Fed interest rate meeting Aug. 1 showed a growing number of members wanted to see the central bank do more to help the economy. And there had been speculation Mr. Bernanke would use his speech to signal more assistance, possibly in the form of further quantitative easing. This involves the Fed printing more money to buy bonds.
But late August has seen a string of positive economic data released.
Analysts had earlier pointed out that the Fed wouldn’t make a specific commitment on stimulus at least until the release next Friday of the non-farm payrolls for August. Job creation data for July beat expectations.
The commodity-sensitive loonie was also supported by higher commodity prices.
The October crude contract on the New York Mercantile Exchange was ahead $1.78 to $96.40 a barrel.
Metal prices also gained ground with the December copper contract on the Nymex was up 1 cent at $3.45 a pound.
December bullion gained $21.70 to $1,678.80 an ounce.