Canadian dollar advances, August economic growth beats expectations

TORONTO – The Canadian dollar was higher Thursday as growth for August came in higher than economists had forecast.

The loonie was up 0.38 of a cent to 95.76 cents US after Statistics Canada reported that gross domestic product grew by 0.3 per cent in August against the 0.2 per cent rise that was expected.

That meant the economy grew at an annualized pace of two per cent, versus a consensus of 1.7 per cent.

“Overall, a solid number, enough to have the quarter tracking in the mid-two per cent range,” observed CIBC World Markets chief economist Avery Shenfeld.

Meanwhile, there was uncertainty on financial markets after Wednesday’s announcement from the U.S. Federal Reserve left traders with the impression that the central bank could start tapering its US$85 billion monthly bond purchasing scheme as early as December.

The Fed said it would maintain the program for now but hinted that tapering could occur earlier than many investors thought. There had been hopes that the Fed wouldn’t move until at least March, well after Janet Yellen has taken over the reins at the central bank.

Any hint of withdrawing the asset purchases has had a negative effect on markets because the quantitative easing program has kept long-term rates low, leaving investors to pour more money into stocks which in turn has fired a strong rally on many equity markets.

Commodities were lower with December crude down 66 cents to US$96.11 following a tumble of almost $1.50 Wednesday in the wake of data showing a much bigger than expected rise in U.S. inventories last week.

December copper lost three cents to US$3.30 a pound and December bullion fell $21.20 to US$1,328.10 an ounce.