The Canadian dollar advanced Monday after five days of steep losses amid a Bank of Canada survey showing generally upbeat business expectations.
The loonie climbed 0.47 of a cent to close at 92.2 cents (U.S.) as the greenback declined against most major currencies.
The Canadian central bank’s business outlook survey said there are some positive signs for the economy, but firms remain concerned about weak demand and domestic uncertainty. The bank says sales expectations were supported by improvements in the United States.
“The Bank of Canada will likely take some cautious optimism about the survey results as it is looking for investment and exports to support strengthening growth in 2014 and 2015,” said Royal Bank of Canada assistant chief economist Paul Ferley.
The loonie fell heavily last week, losing well over 2 cents to its lowest levels since September, 2009, amid a disappointing December employment report.
Markets also dealt with a weak U.S. jobs report that reported only 74,000 jobs had been created in December. That missed estimates for at least 200,000 jobs and raised speculation about how quickly the Federal Reserve may move to end a key stimulus program, its massive monthly bond purchases.
The Fed moved last month to cut those purchases by $10-billion to $75-billion a month and said further tapering was contingent on economic strength, particularly in the employment sector.
However, the Canadian dollar started sliding well before the employment data came out as speculation about Fed tapering has pushed the U.S. dollar higher.
The loonie has also been pressured recently by a dovish stance on interest rates by the Bank of Canada, data showing a growing trade deficit and lower U.S. imports.
“To date, Canada’s oil exports to the U.S. have continued to trend higher. However, there is uncertainty over the path from here as well as how Canada will ultimately transport oil,” observed Camilla Sutton, chief foreign exchange strategist at Bank of Nova Scotia.
“Markets do not like uncertainty, particularly when the risk is negative. This is a Canadian dollar negative over the next six months.”
Commodity prices were mixed with February crude on the New York Mercantile Exchange falling below $92 a barrel as Libyan production continued to ramp up and the possibility of increased crude exports from Iran raised the prospect of an excess of supply on global markets.
Iran and six world powers announced a plan Sunday to implement a six-month interim agreement on the Islamic Republic’s nuclear program. Some economic sanctions against Iran will be eased while Tehran has agreed to limit its uranium enrichment.
February crude on the Nymex closed down 92 cents to $91.80 a barrel.
March copper was up a penny at $3.35 a pound while February gold bullion moved $4.20 higher to $1,251.10 an ounce.Report Typo/Error