BUSINESS

Canadian dollar makes gains as optimism about US economy develops

08/07/2012 09:10 EDT | Updated 10/07/2012 05:12 EDT
TORONTO - The loonie shifted above parity with the U.S. dollar Tuesday as crude oil prices moved higher and optimism lingered about the U.S. economy.

The Canadian dollar ended the day above par, at 100.25 cents US, up 0.44 of a cent from Friday's close.

Much of the optimism came from a shift in the U.S. markets, where stronger corporate earnings reports have given some credence to a positive shift in the economy, while expectations are materializing that central banks will act to support the economy.

The improved sentiment follows data last week on U.S. employment that surprised observers. The U.S. economy generated 163,000 jobs last month, better than the 100,000 gain that was projected. But, the unemployment rate rose to 8.3 per cent, up 0.1 per cent.

"The slightly-improved tone in financial markets, modestly better U.S. economic data and firmer oil prices have helped to both strengthen the Canadian dollar and wring out expectations of a possible rate cut by the Bank of Canada," said Mark Chandler, head of Canadian FIC strategy at RBC Capital Markets in a note.

More good news on the U.S. jobs front came Tuesday as the U.S. Labour Department said job openings rose to a seasonally adjusted 3.8 million in June, up from 3.7 million in May. That's the most in four years, and comes as layoffs also fell.

Meanwhile, Statistics Canada said the value of building permits issued in June fell 2.5 per cent to $6.8 billion in June, largely due to a drop in the non-residential and residential sectors in Alberta and British Columbia. The drop follows a 7.1 per cent increase in the previous month.

In commodities, the September crude contract on the New York Mercantile Exchange ahead $1.47 to close at US$93.67 a barrel, its highest level in two months.

September copper moved up nearly 5.2 cents to US$3.44 a pound while December gold dropped $3.40 to US$1,612.80 an ounce.