Canadian dollar rallies as economy grows faster than anticipated

TORONTO: The Canadian dollar strengthened against its US counterpart on Friday as oil prices rose and data showed the domestic economy growing faster than expected in November, with the loonie clawing back some of this week's decline.

The Canadian economy grew by 0.7% in November, surpassing estimates for a 0.4% gain, data from Statistics Canada showed. A preliminary estimate pointed to a 0.3% advance for December GDP, while fourth-quarter annualized growth was seen at 7.8%.

Last week, the Bank of Canada projected fourth-quarter growth of 4.8%. The unprecedented liquidity injected into the financial system from the BoC's bond purchases has pushed some money market rates below the central bank's targeted interest rate, and analysts say the pressure will persist until the quantitative easing program is scaled back.

The price of oil, one of Canada's major exports, rose as a cut in Saudi Arabian oil supply and falling US oil inventories offset concerns caused by new coronavirus variants and slow vaccine rollouts.

US crude oil futures rose nearly 1% to $52.85 a barrel, while the Canadian dollar was trading 0.5% higher at 1.2759 to the greenback, or 78.38 US cents. The currency traded in a range of 1.2754 to 1.2874.

For the week, the loonie was on track to slip 0.2%, after a volatile few days on Wall Street. Global shares fell on Friday as a Wall Street battle between hedge funds and retail investors and a row in Europe over COVID-19 vaccine supply cooled risk appetite.

Canadian government bond yields were higher across a steeper curve in sympathy with US Treasuries, with the 10-year up 4 basis points at 0.914%.