Canadian dollar rises on stronger than expected GDP growth, higher commodities

TORONTO – The Canadian dollar was higher Friday as the economy expanded at a faster than expected pace during June.

The loonie was up 0.36 of a cent to 101.14 cents US after Statistics Canada said gross domestic product increased by 0.2 per cent, against the 0.1 per cent rise that economists had expected. This translated into a 0.5 per cent gain for the second quarter with growth helped along by rising business investment.

The agency reported that GDP expanded at an annual rate of 1.8 per cent in the April-June period, slightly better than the 1.7 per cent pace recorded in the U.S.

Meanwhile, traders were focused on a much-anticipated speech by U.S. Federal Reserve chairman Ben Bernanke and whether he signals another round of economic stimulus is in the works.

Hopes for further stimulus rose sharply after the release last week of minutes from the last Fed interest rate meeting Aug. 1 said a growing number of members wanted to see the central bank do more to help the economy. And there has been speculation Bernanke would use a speech at the Fed’s annual retreat at Jackson Hole, Wyo., on Friday to signal more assistance, possibly in the form of further quantitative easing. This involves the Fed printing more money to buy bonds.

But late August has seen a string of positive economic data released, and there are concerns that Bernanke will reassure markets that the Fed is ready to help if needed, but that economic conditions now don’t warrant another round of stimulus.

Analysts have also pointed out that the Fed wouldn’t make a commitment to more help before the release next Friday of the non-farm payrolls for August. Job creation data for July beat expectations.

Bernanke’s speech is set to take place at 10 a.m. EDT.

The commodity-sensitive loonie was also supported by higher commodity prices.

The October crude contract on the New York Mercantile Exchange was ahead 88 cents to US$95.50 a barrel.

Metal prices also gained ground with the December copper contract on the Nymex was up two cents to US$3.46 a pound.

December bullion gained $8.20 to US$1,665.30 an ounce.