BUSINESS

Loonie, commodities make gains as traders sell safe haven U.S. dollar, gold

09/15/2011 09:00 EDT | Updated 01/12/2012 02:09 EST
TORONTO - The Canadian dollar rose steadily against its U.S. counterpart Thursday as the greenback weakened following a move to make more American dollars available to European banks struggling with the eurozone's debt crisis.

The loonie gained 0.7 of a cent to 101.63 cents US after the European Central Bank decided to launch the three-month loans in co-ordination with the U.S. Federal Reserve, Bank of England, Bank of Japan and the Swiss National Bank.

"The co-ordinated effort by the central banks is strengthening the euro, it's reducing the U.S. dollar as a safe haven and it's putting the commodity rally mode back in gear," said Alison Mendes, managing director and portfolio manager at Manulife Asset Management.

A weaker greenback usually helps boost commodity prices that are denominated in U.S. dollars, as it makes them less expensive for holders of other currencies.

Oil was up 49 cents at US$89.40 a barrel. Gold backed off $45.10 to US$1,781.40 an ounce. Copper added six cents to US$3.96 a pound.

The loonie's gain also followed a Statistic Canada report that manufacturing sales rose 2.7 per cent to $46.7 billion in July after three straight declines.

Oil products and steel, aluminum and other primary metal manufacturing were among the biggest contributors to the solid gain, which was nearly twice what economists had expected for July.

Meanwhile, the number of Americans applying for unemployment benefits last week jumped to the highest level in three months, a sign that layoffs could be increasing. The U.S. Labour Department said weekly applications rose by 11,000 to a seasonally adjusted 428,000.

The Labour Department also said the Consumer Price Index rose 0.4 per cent in August, after jumping 0.5 per cent in July. The core index, which excludes volatile food and energy prices, rose 0.2 per cent.

Consumers paid more for a range of goods and services last month, pushing up inflation and squeezing Americans' purchasing power.

Other data out of the U.S. revealed the deficit in the broadest measure of foreign trade narrowed in the spring. The U.S. Commerce Department said the current account deficit narrowed 1.3 per cent to $118 billion in the April-June quarter, the smallest imbalance since the final three months of 2010.