Canada’s dollar touched a three-week low on speculation China will seek to curb its faster-than-expected economic expansion, dimming the appeal of currencies that traditionally benefit from global growth.
"This move in the Canadian dollar was more related to the China data," said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal, Canada’s fourth-largest lender. "It looks like China will have to do some more tightening. That’s having a negative impact on commodity currencies."
China’s statistics bureau said the nation’s gross domestic product grew 10.7% last quarter from the year before, faster than the 10.5% median forecast of economists in a Bloomberg News survey.
China is the world’s largest consumer of many of the raw materials that Canada exports, such as copper.
The Canadian currency depreciated as much as 0.6% to touch $1.0524 per U.S. dollar, the weakest level this year, before trading little changed at $1.0458 at 9:47 a.m. in Toronto, compared with $1.0464 yesterday. One Canadian dollar buys 95.62 U.S. cents.
Bank of Montreal’s Jespersen sees "some more downside" to the Canadian dollar and predicted it could weaken to $1.0650.
"We’re still looking to buy the Canadian dollar on dips, but this could be a big dip," he said.
The Bank of Canada was to release its quarterly monetary policy report today at 10:30 a.m. in Ottawa.
"The market will be waiting to see if they’re going to mention the Canadian dollar," said Steven Butler, director of foreign exchange trading in Toronto at Bank of Nova Scotia, the nation’s third-largest lender.
Canada’s central bank, in a statement on Jan. 19 after a policy meeting, reiterated that the currency’s "persistent strength" hampers the nation’s economic recovery. The bank held the benchmark lending rate at a record-low 0.25% and said it will remain there through June, barring changes in the inflation outlook.
Canadian wholesale sales climbed more than forecast in November, advancing 2.5% to $42.4 billion for a third consecutive monthly gain, a Statistics Canada report showed today. Economists expected a 0.5% rise, according to a Bloomberg survey. The gain was led by increased shipments in the automotive and food industries.
Crude oil, Canada’s biggest export, fluctuated in New York before a report forecast to show that U.S. crude inventories increased for a third week.
