Canadian Dollar Trades

Canadian Dollar Trades Near 1-year High Against Greenback

The Canadian dollar surged up against its major counterparts on Thursday morning in New York as a rally in oil prices and encouraging economic reports prompted investors to buy resource linked assets. The loonie jumped to a fresh 11-month high against the US dollar and multi-day highs against the euro and yen.

Crude oil prices continued an upward move today as encouraging economic data added to hopes for strong demand. Light sweet crude oil rallied to $73.09, up 59 cents on the session. Prices hit $73.16 after earlier touching as low as $71.66.

Statistics Canada said in a report that Canada's consumer price index fell 0.8 percent in August from a year earlier. Economists had expected a 0.7 percent decline. In July, the CPI dropped to 0.9 percent, its biggest since 1953.

On a monthly basis the index was unchanged in August, after a 0.3 percent fall in July. Economists predicted 0.1 percent gain.

At the same time, the leading index of Canadian economic indicators rose at its fastest pace in more than seven years in August, according to data released today by Stats Canada. The composite leading index rose by 1.1% last month, after a 0.6% gain in July. The increase was the largest since April 2002.

The Canadian dollar advanced to a 9-day high of 86.09 against the Japanese yen by 10:00 am ET, compared to yesterday's close of 85.36. The pair is presently worth 85.9 with 87.0 seen as the next target level.

The Bank of Japan decided to leave the key interest rate unchanged as expected to support recovery and raised its economic assessment. In its Monetary Policy Meeting, the Policy Board of the BoJ decided by a unanimous vote to maintain the uncollateralized overnight call rate at 0.1%. The last change in the rate was a 0.1% cut in interest rates at the December 2008 meeting.

Against the US dollar, the Canadian currency touched 1.0594 by 10:45 am ET. This set the highest level for the loonie since October 1, 2008. On the upside, resistance is seen around the 1.054 level for the domestic unit. The greenback-loonie pair, which closed Wednesday's deals at 1.0661, is presently quoted at 1.0618.

In the U.S., the Commerce Department released a report today showing that housing starts rose 1.5 percent to an annual rate of 598,000 in August from the revised July estimate of 589,000. Economists had expected starts to edge up to 583,000 from the 581,000 originally reported for the previous month.

At the same time, the U.S. Labor Department revealed that initial jobless claims came in at 545,000 for the week ended September 12. This was down 12,000 from the previous week's revised total. Economists had expected claims to rise to about 575,000.

Later, the Philly Fed said its index of manufacturing activity rose to 14.1 in September from 4.2 in August, with a positive reading indicating growth in the sector. Economists had been expecting a more modest increase by the index to a reading of 8.0.

The Canadian dollar also advanced to an 8-day high of 1.5626 against the European currency by 10:45 am ET. This may be compared to yesterday's close of 1.5682. If the Canadian currency climbs further, resistance is seen around the 1.56 level. Currently, the euro-loonie pair is quoted at 1.565.

First Estimates released by Eurostat, the statistical agency of the European Commission, revealed that the euro area's trade balance showed a surplus of 12.6 billion euros on a seasonally adjusted basis in July compared to a deficit of 3.5 billion euros in the year-ago period. Economists had expected the surplus to come in at a much more modest 1.1 billion euros.

Another report released by Eurostat showed today that construction output declined by a bigger than expected 2% in July compared with the previous month. Economists had estimated a more modest 1.1% drop for the month. In June the output was down 0.3%.