Canadian dollar gains as data shows economy ‘humming along’

TORONTO — The Canadian dollar strengthened against its U.S. counterpart on Thursday, clawing back some recent declines, as faster-than-expected growth in the domestic economy reduced pressure on the Bank of Canada to cut interest rates in the coming months.

The loonie was trading 0.2 per cent higher at 1.3535 to the U.S. dollar, or 73.88 U.S. cents after trading in a range of 1.3526 to 1.3613. Last Friday, it touched a threemonth low at 1.3614.

Canada’s gross domestic product increased 0.6 per cent in January from December, its fastest growth rate in a year, led by a bounce back in education services as public sector strikes ended in Quebec. A preliminary estimate for February showed growth of 0.4 per cent.

“The Canadian economic data that came out this morning was more positive than expected,” said Rahim Madhavji, president at Knightsbridge Foreign Exchange. “If the economy is humming along, the Bank of Canada can keep rates higher for longer.”

The Canadian central bank has left its benchmark interest rate on hold at a 22-year high of 5 per cent since July. Money markets see a 68 per cent chance the BoC will begin a rate cutting campaign in June, down from 70 per cent before the data.

Adding to support for the loonie, the price of oil, one of Canada’s major exports, settled 2.2 per cent higher at $83.17 a barrel as investors weighed prospects of tighter oil supplies.

Canadian government bond yields rose across the curve in a shortened session ahead of the Good Friday market holiday.

The 2-year was up 4.5 basis points at 4.187 per cent after earlier touching its highest level since March 19 at 4.210 per cent.