BUSINESS

Loonie moves lower after U.S. Fed statement sends greenback higher

08/01/2012 09:00 EDT | Updated 10/01/2012 05:12 EDT
TORONTO - The Canadian dollar lost ground against the greenback on Wednesday after the U.S. Federal Reserve decided it wouldn't take any action to stimulate growth in the economy.

The Fed's statement drove the U.S. dollar higher against other currencies as investors flocked to the perceived safe haven, while the loonie backed off 0.23 of a cent to 99.48 cents US.

Other economic data from the U.S. demonstrated some of the challenges facing the country's economy.

The latest U.S. data showed that manufacturing shrank for the second straight month in July. The Institute for Supply Management, a trade group of purchasing managers, said its index of manufacturing activity ticked up to 49.8, from 49.7 in June, further evidence of an economy growing at a sluggish pace

Payroll provider ADP said U.S. businesses added 163,000 jobs last month. The report comes two days before the U.S. government reports jobs numbers for July.

Overseas, sentiment in Asia took a hit after an expected improvement in China's manufacturing failed to materialize.

China's manufacturing remained weak in July, according to surveys released Wednesday, and analysts said weakening export demand pointed to the need for more efforts to revive growth in the world's second-biggest economy.

The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers' index, or PMI, fell 0.1 percentage point to 50.1 in July, the slowest growth in eight months and just above the 50 level signifying expansion.

In commodities, August gold closed down $6.80 to US$1,603.70 an ounce on the New York Mercantile Exchange. September copper moved down 4.3 cents to US$3.38 a pound.

The September crude contract on the Nymex closed 85 cents higher to US$88.91 a barrel.