Saturday, 01 December 2012 05:28
TORONTO: The Canadian dollar weakened marginally against the US currency on Friday as domestic economic growth data disappointed the market and a fall in US consumer spending pointed to troubles ahead for Canada's biggest export market.
The resource-linked currency saw some interest based on bets that Ottawa will approve a Chinese company's $15.1 billion acquisition of energy producer Nexen Inc next month, one analyst said.
"You may be getting some pre-positioning ahead of the Nexen decision that's coming up in a couple of weeks, with many thinking that the government will approve that," said John Curran, senior vice president at CanadianForex.
A Canadian cabinet member known to have reservations about the bid to buy Nexen said Friday that at least some of Canada's concerns about getting reciprocal treatment from China have been addressed by an investment pact.
But the broader influences on the currency were negative as figures showed Canadian economic growth was weak in the third quarter, and that US consumers spent less in October.
"On a cross basis the Canadian dollar is doing OK, but against the US it's just a non-event," Curran said, pointing to gains against the Japanese yen, British pound and New Zealand dollar.
The Canadian currency, acutely sensitive to signs of stagnation in the global economy, ended trade at C$0.9936 to the greenback, or $1.0064, compared with C$0.9928, or $1.0073, at Thursday's North American close.
That meant it recorded a slight 0.2 percent loss against the US dollar for the week but firmed 0.7 percent against the greenback over the month.
CANADA GROWTH SLOWS
The Canadian economy grew at a weaker-than-expected 0.6 percent annual rate in the third quarter as exports fell at the fastest pace in more than three years, business investment sputtered and the housing market cooled.
That growth rate contrasts with the 2.7 percent rate notched in the United States for the quarter, and was below the 0.9 percent forecast for Canada in a Reuters poll.
The soft number adds to pressure on Canada's central bank to retract its stance that interest rates will need to be raised.
"I think the biggest market impact is that it's likely to have the Bank of Canada sound slightly more cautious, and that's also putting downward pressure on the Canadian dollar," said Camilla Sutton, chief currency strategist at Scotiabank.
The central bank is due to issue a monetary policy decision next Tuesday, with none of the forecasters polled by Reuters expecting a rate move.
Meanwhile, a fall in US consumer spending in October pointed to Canada's biggest trading partner also recording slower growth in the current quarter.
It was the first fall in five months, though superstorm Sandy was cited as a factor in choking off car sales and causing work interruptions.
Government debt prices were broadly higher, with the two-year bond adding 2.5 Canadian cents to yield 1.067 percent and the benchmark 10-year bond rising 10 Canadian cents to yield 1.698 percent.
Copyright Reuters, 2012