C$ weakens as strong US GDP eclipses Canadian data

OTTAWA: The Canadian dollar was weaker against the greenback on Tuesday as figures that showed an acceleration of economic growth in the United States in the third quarter overshadowed data showing stronger-than-expected growth in Canada in October.

The loonie was seen as likely to stick to its recent trading range, however, as volumes wind down heading toward the end of a holiday-shortened week. Canadian bond and equity markets will close early on Wednesday before the Christmas and Boxing Day holidays.

The final Canadian economic report of the year showed gross domestic product rose by 0.3 percent in October, helped by a surprising surge in manufacturing.

But the figures did little to help the loonie, which was weighed on by a separate report that showed third-quarter US economic growth was revised to an annualized 5 percent, the fastest pace in 11 years.

"It's hard to argue with that. It carries the day," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto, of the US GDP report.

The Canadian dollar was at C$1.1662 to the greenback, or 85.75 US cents, weaker than Monday's close of C$1.1637, or 85.93 US cents.

The US data will likely have investors scrambling to try to gauge how soon the US Federal Reserve will start to raise interest rates. Fed Chair Janet Yellen said last week the central bank was unlikely to hike rates for "at least a couple of meetings," which would mean April at the earliest.

"As you get into January where April is only a couple meetings away, very quickly people could be turning their thoughts to the springtime potential for that," Mikolich said.

In the near term, the Canadian dollar could push up against its low for the year at C$1.1674, but it will be difficult for the currency to push into new territory, Mikolich said.

Canadian government bond prices were lower across the maturity curve, with the two-year down 6 Canadian cents to yield 1.047 percent and the benchmark 10-year down 39 Canadian cents to yield 1.838 percent.