News Column

Canadian dollar rises amid positive trade data, better than expected U.S. growth

August 28, 2014

Malcolm Morrison, The Canadian Press

TORONTO - The Canadian dollar was higher Thursday as Canada's current account deficit improved slightly during the second quarter.

The loonie rose 0.1 of a cent to 92.22 cents US as Statistics Canada reported that deficit edged down $200 million to $11.9 billion.

The decline reflected a slight increase in the deficit on trade in goods and services, which was more than offset by a lower investment income deficit.

Meanwhile, other data out showed the U.S. economy grew more than expected during the second quarter. The latest revision shows gross domestic product grew by 4.2 per cent, versus the original reading of four per cent. Economists had generally expected a dip to 3.8 per cent.

The showing was a huge improvement from the first quarter, when GDP contracted 2.1 per cent, largely because of severe winter weather.

Statistics Canada is expected to release the June reading on gross domestic product on Friday. Economists expect that GDP grew by 0.2 per cent in June, which would translate into annualized growth of 2.6 per cent.

And next Wednesday, the Bank of Canada releases its next decision on interest rates.

The dollar surged eight-tenths of a cent on Wednesday following the announcement that Burger King will buy Tim Hortons for $12.5 billion. The cash-and-stock deal will see Burger King majority shareholder 3G Capital own 51 per cent of a new company which will be the world's third-largest fast food restaurant company.

The loonie has been pushed higher in the past by big corporate deals. That's because a foreign buyer acquiring a Canadian company will need Canadian dollars to close the deal, boosting demand for the loonie on financial markets.

On the commodity markets, December bullion ran up $10.50 to US$1,293.90 an ounce amid nervousness that Russia was escalating its role in the Ukraine conflict, a move that could provoke the U.S. and European Union to impose further sanctions on Russian businesses and individuals.

The strategic southeastern Ukraine town of Novoazovsk appeared firmly under the control of Russia-backed separatists. The southeastern portion of Ukraine along the Azov Sea previously had escaped the fighting engulfing areas to the north.

October crude in New York moved up 23 cents to US$94.11 a barrel.

December copper was down two cents to US$3.17 a pound.

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Source: Canadian Press DataFile

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