Dollar rises amid positive Chinese economic data, interest rate expectations

TORONTO – The Canadian dollar was higher Monday amid mixed economic news from Asia and Europe.

The loonie rose 0.14 of a cent to 93.15 cents US on top of a gain of almost two-thirds of a cent on Friday to a five-month high. The currency rose sharply as higher than expected inflation data on Friday raised questions about whether the Bank of Canada might move interest rates higher sooner than thought.

“On the back of the CPI release, expectations for the BoC first interest rate hike increased marginally, but still stand at just a 13 per cent probability in the next year,” said Camilla Sutton, Chief FX Strategist, Managing Director Scotiabank Global Banking and Markets.

Meanwhile, data released Sunday showed the Chinese manufacturing sector moving into expansion territory. HSBC’s purchasing managers index hit a seven-month high at 50.8, the first time the index has moved above the 50 level since December.

However, other data showed that business activity in the eurozone slowed for a second straight month in June. Data firm Markit said its composite purchasing managers index for the euro zone fell to 52.8 from 53.5 in May. Activity in Germany’s private sector slowed slightly, but the main source of weakness for the eurozone was once again France.

The Chinese data helped push July copper up two cents to US$3.14 a pound.

Bullion prices backed off slightly after running ahead last week amid tensions between Ukraine and Russia and a growing insurgency in Iraq. August gold was down $1.20 to US$1,315.40 an ounce.

Oil prices declined marginally after rising steadily over the last two weeks as a Sunni uprising gained momentum in Iraq with the August contract off a dime to US$106.73 a barrel.