BUSINESS

Loonie finds lift from ECB pledge to save euro, data shows slowing U.S. growth

07/27/2012 08:48 EDT | Updated 09/26/2012 05:12 EDT
TORONTO - The Canadian dollar closed higher Friday amid further indications that European leaders are finally getting a grip on the region's sovereign debt crisis.

The loonie gained 0.51 of a cent to 99.56 cents US as the loonie and other riskier assets such as commodities continued to find lift after German Chancellor Angela Merkel and French President Francois Hollande released a joint statement saying they will do anything they can to stop the 17 countries that use the euro from breaking up. They didn’t offer details.

Markets had rallied Thursday after the European Central Bank president pledged to do whatever it takes to save the euro currency union. Mario Draghi suggested that the central bank could intervene in markets to lower the borrowing rates of financially weak countries like Spain.

Traders also took in data showing U.S. economic growth for the second quarter came in just about where economists expected.

The U.S. Commerce Department reported that the economy grew at an annual rate of just 1.5 per cent from April through June, which was the slowest growth in a year.

It also says the economy grew a little better than previously thought in the January to March quarter. It raised its estimate to a two per cent rate, up from 1.9 per cent.

Markets have been depressed in recent weeks as the focus of the European government debt crisis moved to Spain. Traders skeptical over the government's ability to manage high debt levels have driven up bond yields past the seven per cent level, which is considered unsustainable in the long run.

Draghi suggested that the ECB considers it part of its job to keep government borrowing rates at normal levels. It could do so by buying government bonds, which has the effect of lowering their yield, or interest rate.

Commodity prices advanced with the September crude contract on the New York Mercantile Exchange ahead 74 cents to US$90.13 a barrel.

September copper ran ahead three cents to US$3.43 a pound while August gold gained $2.90 to US$1,618 an ounce.