The Canadian dollar closed up almost a full U.S. cent Wednesday amid higher metal prices and positive economic data from Canada’s biggest trading partner.
The dollar gained 0.91 of a cent to $1.0225 (U.S.) after having tumbled almost three-quarters of a cent a day earlier.
The loonie had sold off in the wake of a speech late Monday by Bank of Canada Governor Mark Carney, which traders interpreted as containing a more dovish tone toward the possibility of hiking rates. The bank makes its next announcement on interest rates next Tuesday.
The dollar took off mid-morning following the release of data that provided a further indication that the housing sector recovery in the U.S. is strengthening.
The Commerce Department said Wednesday that builders broke ground on homes at a seasonally adjusted annual rate of 872,000 in September, an increase of 15 per cent from the August level.
And applications for building permits, a good sign of future construction, jumped nearly 12 per cent to an annual rate of 894,000, also the highest since July, 2008.
Canada’s commodity sensitive currency was supported by rising metal prices as December copper ran ahead 5 cents to $3.75 a pound while December gold gained $6.70 to $1,753 an ounce.
Oil prices were little changed after the U.S. Energy Information Administration reported a bigger-than-expected rise in crude supplies last week. The November crude contract on the New York Mercantile Exchange inched up 3 cents to $92.12 a barrel as data showed that crude supplies rose by 2.9 million barrels, against an expected rise of 1.5 million barrels.
Risk sentiment also improved after Moody’s rating agency did not cut its credit grade on Spain to junk status, as had been widely feared in recent weeks.
Moody’s said after the European market closed on Tuesday that it was keeping its Baa3 rating on Spain, the lowest investment grade.
Investors think it’s only a matter of time before Spain will make a request for help to Europe’s bailout fund, a necessary condition for the European Central Bank to start buying its bonds in the markets.
The Spanish government said Wednesday it will decide within the next few weeks whether to ask for outside financial help.
The Canadian dollar and commodity prices could find themselves impacted by the release Wednesday night of the latest growth data for China. The consensus view of economists is that the data is expected to show third-quarter growth eased to 7.4 per cent from a year earlier, down from 7.6 per cent in the prior quarter.
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