Canadian dollar hits 7-month high amid strong U.S., Chinese manufacturing data

TORONTO – The Canadian dollar advanced Wednesday morning despite a soft reading earlier in the week on economic growth during April.

The loonie was up 0.26 of a cent from Monday’s close to 93.98 cents US after earlier hitting a high of 94.12 cents US, its best levels since December. Banks were closed Tuesday for the Canada Day holiday.

On Monday, Statistics Canada had reported that April gross domestic product grew only 0.1 per cent, about half the pace that was expected.

The dollar has been steadily rising over recent weeks because of a number of factors.

Oil prices have climbed amid rising geopolitical tensions in Ukraine and the Middle East. Also, higher than expected inflation figures have raised questions about whether the Bank of Canada might hike interest rates sooner than expected.

The currency also found support this week in strong manufacturing data from China and the U.S.

However, analysts think the rally in the loonie could be short lived.

“We do not expect (the currency) to sustain these levels for long,” said Camilla Sutton, Chief FX Strategist, Managing Director Scotiabank Global Banking and Markets.

“The Bank of Canada and exporters are likely uncomfortable as the economy is not strong enough to sustain these Canadian dollar levels.”

Traders looked ahead to the other major economic event for the week — the release Friday of the U.S. government’s employment report for June.

Ahead of that data, U.S. payrolls firm ADP reported that the private sector created 281,000 jobs during June. Economists expect the government’s report to show that the economy cranked out about 210,000 jobs last month.

Canadian employment data for June will be released on July 11.

Commodities were mixed with August crude on the New York Mercantile Exchange down 45 cents to US$104.89 a barrel. July copper gained three cents to US$3.22 a pound while August bullion faded 50 cents to US$1,326.10 an ounce.