- Currency extends its longest run of gains in two months
- Manufacturing supports higher GDP pace during January
The Canadian dollar rose to the highest in eight months versus its U.S. counterpart after a report showed the nation’s economy growing at its fastest in three years.
The currency strengthened for a fourth day, its longest streak of gains since the beginning of February, as gross domestic product grew 0.6 percent in January from a month earlier, the largest increase since July 2013. That exceeded 20 of 21 estimates before the report, with manufacturing leading the expansion.
Canada’s currency, known as the loonie for the image of the aquatic bird on its C$1 coin, slumped to its lowest in more than a decade earlier this year as the price of oil -- the nation’s major export -- tumbled. A rally in oil in recent weeks has bolstered the currency, lifting it 7.4 percent since Dec. 31, endorsing the Bank of Canada’s decision to refrain from further easing at its meeting this month.
“It’s was a pretty strong report through and through,” said Mazen Issa, senior foreign-exchange strategist at Toronto-Dominion Bank in New York. “Near-term risks are tilted towards a little bit more Canadian dollar strength,” he said, adding that longer term, “C$130 or C$135 seems to consistent with fundamental re-balancing in the economy.”
Forecasters are expecting the Canadian dollar to weaken by year-end. The median of more than 50 estimates compiled by Bloomberg calls for the loonie to fall to C$1.33 per U.S. dollar by Dec. 31. Hedge funds and other large speculators are also positioned for a slump, even while curbing bets on a weaker loonie to the least since June last week.
The loonie climbed as much as 0.8 percent to C$1.2863 per dollar, its highest on a closing basis since July 14. The currency traded up 0.7 percent at C$1.2870 as of 9:53 a.m. in Toronto. One loonie buys 77.70 U.S. cents.