BUSINESS

Dollar up, traders focus on major U.S. Fed meeting, latest read on Canadian GDP

08/27/2012 08:45 EDT | Updated 10/27/2012 05:12 EDT
TORONTO - The Canadian dollar closed higher Monday as traders focused on central bankers and the latest snapshot of Canadian economic growth.

The currency was up 0.08 of a cent to 100.93 cents US.

The latest reading of Canadian gross domestic product comes out Friday. The consensus calls for economic growth of 0.1 per cent in June, the same reading as in May. This would add up to annualized growth of 1.6 per cent.

Markets ended last week on a positive note after the Wall Street Journal reported that U.S. Federal Reserve chairman Ben Bernanke had written a Republican lawmaker saying there was room for the central bank to do more to help the recovery.

And now traders are looking ahead to the Fed's annual retreat in Jackson Hole, Wyo., later this week. Bernanke delivers a keynote speech Friday while European Central Bank president Mario Draghi speaks on Saturday.

Draghi said Aug. 2 that the ECB was prepared to do whatever was necessary to keep the euro currency union intact.

Meanwhile, there were signs that the weakening eurozone economy is starting to affect Germany, Europe’s biggest economy.

German business optimism, as calculated by the Ifo business survey, fell more than expected in August.

The index released Monday fell to 102.3 points in August, down from a revised 103.2 in July. Market analysts expected a reading of 102.6.

Troubles elsewhere are starting to make themselves felt. Italy and Spain, the No. 3 and No. 4 eurozone economies, are in recessions as they try to reduce budget deficits and struggle to refinance their debts in bond markets.

Oil prices backed off from the highs of the session with the October crude contract on the New York Mercantile Exchange down 68 cents to US$95.47 a barrel. Prices had been higher earlier Monday but backed off on increased speculation that the U.S. will release oil from reserves to ease the commodity's rising cost.

Forecasts for tropical storm Isaac also moderated, easing concerns that the storm would damage key oil and gas operations in the Gulf of Mexico. The U.S. government says 78 per cent of the oil production in the Gulf of Mexico has been halted in preparation for Isaac.

Other commodities were also lower with September copper off one of a cent at US$3.48 a pound while December gold gained $2.70 to US$1,675.60 an ounce.

There were also hopes that the Chinese government is ready to boost the world’s second-biggest economy after Premier Wen Jiabao called for efforts to stabilize weakening exports.

The report from the official Xinhua news agency gave no indication of possible measures but Beijing previously has promised tax cuts and loans by state banks to help struggling exporters.

Export growth in July fell to just one per cent, well below forecasts, from the previous month’s 11.3 per cent growth due to weak demand in debt-crippled Europe, China’s biggest export market, and the United States, which is struggling with a sluggish recovery.