Saturday, 14 July 2012 02:48
TORONTO: The Canadian dollar rose to a one-week high against the US currency on Friday and a record peak against the euro after Chinese economic data eased investor worries about global growth concerns.
Global stocks and commodity prices rose across the board as China gross domestic product data came in line with expectations. The euro gained against the US dollar for the first time in four days on Friday, bouncing from a two-year low on a rebound fueled by the Chinese data.
"Today what we have is a somewhat weaker US dollar across the board and the commodity bloc of currencies doing fairly well, really because the Chinese data were not as bad as the whisper number," said Camilla Sutton, chief currency strategist at Scotiabank.
China's economy grew at its slackest pace in more than three years, highlighting the need for more growth-oriented policy vigilance from Beijing, a prospect which boosted prices for key Canadian exports like oil and copper.
"The rumor yesterday was that it was wildly going to disappoint, and so not having disappointed to that extent, combined with the potential for further stimulus is positive for global growth currencies," added Sutton.
The Canadian dollar ended at C$1.0146 versus the greenback, or 98.56 US cents, up from Thursday's close at C$1.0186 against the US dollar, or 98.17 US cents. The currency rose about 0.5 percent for the week.
Against the euro, the Canadian dollar advanced to C$1.2370, or 80.84 euro cents, its strongest level against the common currency since it was created in January 1999.
Global stocks, currency and commodity markets shrugged off a survey that showed US consumer sentiment cooled again in early July to its lowest in seven months.
For the Canadian dollar, analysts said the Bank of Canada meeting on Tuesday is the biggest near-term risk.
A Reuters poll showed the Bank of Canada is expected to keep interest rates on hold until the second quarter of 2013 as a slowing global economy hurts the domestic outlook and as Ottawa's new mortgage rules take pressure off the central bank to cool the country's housing market.
"Rates are on hold pretty firmly right now. What basically the market will be looking for is how the messaging will have changed," said Greg Moore, foreign exchange strategist at TD Securities.
"Clearly the global outlook is going to be a little bit softer so the Bank of Canada is going to have to recognize that in terms of their own outlook. But we still maintain that the forward-looking language is going to stick with the message that the next move will be up instead of down for rates."
The rate announcement shouldn't weigh on the currency unless the central bank becomes "a little more dovish," added Moore, who expects the Canadian dollar to trade in a range of C$1.01 to C$1.0250 versus the greenback up until the central bank's rate announcement.
Canadian bond prices were slightly lower across the curve, tracking similar action in US Treasuries where debt prices fell as the rebound in stocks diminished the safe-haven appeal of bonds.
The two-year government bond was off 5 Canadian cents to yield 0.991 percent, while the benchmark 10-year bond was down 7 Canadian cents to yield 1.638 percent.
Copyright Reuters, 2012