Canadian dollar up 1.5 cents US. from Toronto Star
The Canadian dollar soared a cent and a half today, recovering most of the previous day’s loss, on the strength of solid consumer activity and a revival in oil, gold and metal prices.
The loonie was up 1.50 cents at 103.50 cents US at midafternoon, just a day after an attempt by Bank of Canada governor David Dodge to talk down the currency had helped prod the dollar down by 1.55 cents US.
Today’s gain came after Statistics Canada reported retail sales rose 0.7 per cent in August to $34.5 billion, after decreases in June and July. This suggested the economy and consumer sentiment are holding up finance market unease.
“Even in the heart of the August credit turmoil and equity market swoon, Canadian consumers kept right on going,” commented Douglas Porter of BMO Capital Markets.
“Looking ahead, consumer spending will be supported by rising wages, the strong likelihood of tax cuts, and the tantalizing probability of a windfall of lower prices thanks to the loonie’s rampage.”
The Canadian dollar also benefited from an early rise in oil prices today on fears of a disruption in Iraqi supplies. However, crude lost some ground later on expectations the U.S. government’s weekly fuel inventory report tomorrow will show rising supplies.
George Davis, senior technical analyst at RBC Capital Markets, noted that in addition to the oil-price stabilization from two days of steep declines, gold is higher.
“We’ve seen some very aggressive buying of the currency today and I think that people are reacting to overall U.S. dollar weakness and there may be some potential merger-and-acquisition-related flows involved in this move as well,” he added.
Davis was referring to cash flooding into Canada as Rio Tinto pays investors for the Alcan Inc. shares to conclude the US$38.1-billion takeover of Canada’s largest aluminum company.
Apparently forgotten today was Dodge’s warning Sunday that the loonie’s surge from 94 cents US at the beginning of September was ``abnormally quick” and defies economic fundamentals.
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