Loonie heads higher despite disappointing Chinese manufacturing data

TORONTO – The Canadian dollar headed higher Thursday despite weaker-than-expected manufacturing data from China.

The loonie was ahead 0.21 of a cent to 96.62 cents US.

HSBC reported that its preliminary Purchasing Managers Index fell to a seven-month low of 49.6 in May from April’s 50.4. Numbers below 50 indicate that activity is contracting. Analysts had expected a more modest decline to 50.3.

The drop spurred concerns over the future outlook for commodities, like copper.

Investors had been on edge Wednesday over what U.S. Federal Reserve Chairman Ben Bernanke was going to say about the central bank’s monetary stimulus program.

In prepared remarks to the U.S. Congress, Bernanke said the Fed has no plans of stopping their $85-billion-a-month bond purchases, but when pressed, he said the central bank would consider it once the economy shows significant signs of improvement — which could be as early as U.S. Labor Day in September.

Minutes of the Fed’s last monetary meeting from April 30-May 1, released following Bernanke’s speech, showed that some officials had considered slowing down the asset purchases as early as June.

The loonie has been declining against the strong U.S. dollar, with some expecting the currency to continue to stray further away from being at near parity, which it was at just a few weeks ago.

On the commodities front, June gold bullion jumped ahead $20.20 to US$1,387.60 an ounce and July copper fell 10 cents to $3.28 a pound. The July crude contract was down $1.19 to US$93.09 a barrel.