The Canadian dollar closed higher Monday as risk appetite improved amid further economic and social reforms by the Chinese government.
The loonie closed 0.14 of a cent higher at 95.86 cents (U.S.) as the greenback moved lower in the face of uncertainty as to when the Federal Reserve might start letting up on its monthly $85-billion of bond purchases.
Markets found support Monday from China’s announcements of more details to its economic and social reform program, including opening state industries to greater competition, loosening its one-child policy and abolishing labour camps.
China’s leadership has faced pressure to replace a worn-out economic model after growth slowed to a two-decade low in the second quarter.
Meanwhile, China is studying new ways to measure its economy. The country’s statistics bureau says new indicators would be added, such as farmer income from the sale of land-use rights and revisions in the way it calculates the contribution from housing, the nation’s statistics bureau said Monday.
The proposed revision could boost the size of China’s estimate of its gross domestic product, which rose 7.7 per cent over the first nine months of the year from a year earlier.
The focus on the Fed will pick up midweek with the release Wednesday of the minutes from the Fed meeting late last month when the central bank judged the American economy still too weak to start tapering its asset purchases.
That meeting did nothing to lessen the uncertainty surrounding when the Fed might move, particularly as its sounded more positive about the economy.
Last week, Janet Yellen, who is slated to become the next Fed chair, made it clear during confirmation hearings that she supports the Fed’s low interest rate policies.
“We expect [the minutes] to leave the door open to a December taper if there are ongoing improvements in employment and financial markets do not push yields too high,” said Scotia Capital chief currency strategist Camilla Sutton.
“However, considering Janet Yellen’s comments last week, a December taper remains unlikely.”
Those bond purchases have kept bond yields low and encouraged people to buy into equities, resulting in a big stock boom on many markets this year.
It’s a relatively soft week for economic data but traders will take in the latest Canadian retail and inflation data coming out near the end of the week.
The consensus calls for the consumer price index to come in unchanged for October after rising by 0.2 per cent in September.
Statistics Canada releases both reports on Friday.
Commodity prices were lower with the December crude contract on the New York Mercantile Exchange down 81 cents to $93.03 a barrel, its lowest close since May 31. .
December copper was down 2 cents at $3.15 a pound while December gold bullion faded $15.10 to $1,272.30 an ounce.
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