The Canadian dollar was worth more than its U.S. counterpart for the first time in a week after a government report showed the economy grew faster than forecast in November.
The currency rose against the majority of its most traded peers after the Canadian economy grew 0.3 percent to an annualized C$1.56 trillion ($1.56 trillion), following a prior gain of 0.1 percent, Statistics Canada said today in Ottawa. The median forecast in a Bloomberg economist survey was for a 0.2 percent expansion in the month. Canada’s currency has weakened 0.8 percent this month, the most since October.
“Slightly better-than-expected Canadian GDP data is assisting the Canadian dollar,” said John Curran, senior vice president at USForex Ltd., an online foreign exchange dealer, said by phone from Toronto. “We’re running into support levels for U.S., resistance for Canadian, right here, which would be right around the 200-day moving average.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.4 percent to 99.72 cents per U.S. dollar at 5:02 p.m. in Toronto. The last time it closed stronger than parity was Jan. 23. One loonie buys $1.0028.
The U.S. dollar’s 200-day moving average versus the Canadian dollar is 99.87 Canadian cents.
The country’s benchmark 10-year bonds were little changed with yields at 1.99 percent. The 2.75 percent security due in June 2022 gained five cents to C$106.46.
Crude oil, the country’s largest export, fell 0.5 percent to $97.43 per barrel and the Standard & Poor’s 500 Index of U.S. stocks dropped 0.3 percent.
Business in the U.S., Canada’s largest trading partner, expanded more than forecast in January, a sign manufacturing picked up at the start of the year.
The MNI Chicago Report’s business barometer rose to 55.6 this month, the highest since April, after 50 in December. A reading of 50 is the dividing line between expansion and contraction. The median forecast of 48 economists surveyed by Bloomberg was 50.5.
“The Canadian dollar today is back down before parity, and parity is that massive magnet that seems to govern dollar/CAD trading,” said Adam Button, a currency analyst at Forexlive.com, by phone from Toronto. “The catalyst was the Chicago PMI was really strong. Canada is exporting raw materials to American factories and if they’re ramping up production that’s a continued sign of output from Canada and it’s a great reason to buy the Canadian dollar.”
Canada’s latest GDP report suggests growth accelerated in the fourth quarter from the 0.6 percent annual pace seen from July through September, in contrast to the U.S., where output shrank at a 0.1 percent pace at the end of last year. Canada’s expansion has been supported by the job market, with the unemployment rate falling to a four-year low in December.
Bank of Canada Governor Mark Carney said Jan. 23 an increase to his 1 percent benchmark interest rate is “less imminent” and cut his fourth-quarter growth prediction to 1 percent from 2.5 percent.
Investors increased the chances the Bank of Canada will raise interest rates by the end of the year after the GDP figures came out. Investors are pricing in 15.1 basis points of tightening by the bank’s Dec. 4 meeting, compared with 6.7 basis points the day Carney lowered his forecasts, Bloomberg calculations based on overnight index swaps showed.
In a separate report, Statistics Canada said today its index of raw-materials prices paid by manufacturers dropped 2 percent in December from November. Economists in a Bloomberg survey had a median prediction of a 0.3 percent increase.
The loonie has declined 3.2 percent during the past six months among the 10 developed-nation currencies monitored by the Bloomberg Correlation-Weighted Indexes. The greenback fell 4.1 percent.