Canadian dollar pares its monthly decline as economy recovers further

TORONTO: The Canadian dollar edged higher against its U.S. counterpart on Wednesday as domestic data showed the economy continuing to recover in recent months, with the loonie rebounding from an earlier 8-week low hit amid U.S. political uncertainty.

The Canadian economy expanded by 3pc in July as businesses across the country continued to reopen from coronavirus shutdowns, Statistics Canada said, with growth seen gaining at a slower 1pc month-on-month pace in August.

World stocks fell and safer assets such as the yen and U.S. dollar found buyers after a chaotic first U.S. presidential debate and rising COVID-19 cases turned investors cautious, though strong factory surveys boosted China's markets.

The Canadian dollar was trading 0.2pc higher at 1.3366 to the greenback, or 74.82 U.S. cents, having touched its weakest intraday level since Aug. 4 at 1.3420.

The currency was on track to decline 2.4pc in September, ending a five-month streak of gains, as the resurgence in the pandemic weighs on investor sentiment.

The price of oil, one of Canada's major exports, fell for a second day as rising coronavirus infections prompted concerns about further restrictions on global economic activity that could curb fuel demand. U.S. crude prices were down 0.1pc at $39.26 a barrel.

Canada's federal authorities and its two biggest provinces on Tuesday promised new measures to combat a second COVID-19 wave that is notching up as many cases as during the pandemic's peak in April.

Canadian government bond yields edged higher across much of the curve on Wednesday, with the 10-year up half a basis point at 0.541pc.

Canadian home prices, which rallied more sharply than expected this year, are set to rise by less than consumer inflation next year as higher unemployment and lower immigration levels cool down the market, a Reuters poll of analysts showed.