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Canadian dollars.Getty Images/iStockphoto

The Canadian dollar closed sharply lower Thursday while the greenback strengthened amid generally positive private-sector data about the health of North American and Chinese manufacturing sectors.

The loonie was down 0.71 of a cent to 96.64 cents (U.S.) after the Institute for Supply Management said its manufacturing index for July came in at 55.4, higher than June's reading of 50.9 and the best level since April, 2011.

Also, Royal Bank's latest purchasing managers index for the Canadian manufacturing sector came in at 52 for July, down slightly from the June reading of 52.4. However, any level above 50 indicates expansion.

China's official purchasing managers index hit 50.3 last month. That is up only slightly from June's 50.1 reading but economists had expected a modest decline to below 50, the level which divides contraction and expansion.

Commodity prices advanced in the wake of the strong manufacturing data and the U.S. Federal Reserve's interest rate announcement on Wednesday kept economic stimulus.

The September crude contract on the New York Mercantile Exchange was up $2.59 to $107.62 a barrel. Copper added to Wednesday's 8-cent rise, up 6 cents to $3.17 a pound.

December bullion in New York was ahead $1.10 to $1,314.10 an ounce.

The Fed also said at the end of its two-day meeting on interest rates Wednesday that economic growth increased at a modest rate since the last meeting, a slight downgrade from the moderate pace that was assessed at the last meeting in June.

There has been much speculation surrounding the Fed over the last two months, since chairman Ben Bernanke first mentioned that the central bank could start to taper its bond purchases later this year if economic conditions warrant. This key piece of economic stimulus is credited with keeping long term rates low and fuelling a strong rally on markets.

The Fed said Wednesday that it would carry on with its monthly $85-billion of bond purchases and that rates will remain unchanged near zero. Traders think it far more likely the Fed will move towards tapering the purchases at its next meeting in September.

"To us there was no shift in stance and as long as the economy unfolds according to the Fed's forecasts, it is likely to begin tapering in September, completing by mid-2014, while interest rates are expected to remain on hold well into 2015," said Scotia Capital chief currency strategist Camilla Sutton.

Traders also turned their attention to the release of the U.S. non-farm payrolls report coming out Friday. Economists looked for the data to show that the economy created about 190,000 jobs during July.

Ahead of the data, the Labor Department said Thursday that the number of Americans applying for unemployment benefits fell 19,000 last week to a seasonally adjusted 326,000, the fewest since January 2008. The less volatile four-week average slid 4,500 to 345,750.

Meanwhile, the European Central Bank left its benchmark interest rate unchanged at a record low of 0.5 per cent as the bank held off on further efforts to stimulate Europe's lagging economy. The economy of the 17 European Union members that use the euro shrank 0.2 per cent in the first quarter, the sixth quarterly decline in a row.

Also, the Bank of England kept its monetary policy unchanged amid signs that the recovery in Europe's third largest economy is gaining momentum. The bank confirmed it was leaving its main interest rate at 0.5 per cent and would not pump more money into the economy.