BUSINESS

Canadian dollar moves lower amid uncertainty over Fed stimulus plans

08/30/2012 08:46 EDT | Updated 10/30/2012 05:12 EDT
TORONTO - The Canadian dollar closed lower against the American currency Thursday as more data showing an improving economy raised doubts about whether Federal Reserve chairman Ben Bernanke will signal another round of stimulus measures.

The loonie dropped 0.28 of a cent to 100.78 cents US.

Uncertainty picked up after U.S. retailers reported strong sales gains for August. And the U.S. Commerce Department reported that consumer spending rose 0.4 per cent in July, the best showing in five months.

Those reports came on top of the release of the Fed's latest regional survey Wednesday, which showed the pace of U.S. economic growth is expanding.

Other data showed the economy grew faster than earlier reported in the April-June quarter, at a 1.7 per cent annual pace.

All in all, the reports served to raise doubts over whether Bernanke would use a speech Friday at the central bank's retreat at Jackson Hole, Wyo., to hint at further stimulus measures.

Hopes for further Fed stimulus had grown since the release of minutes from the Fed's last interest rate meeting Aug. 1, which showed a growing number of members wanting to inject another round of stimulus into a weakening economy.

But analysts have pointed out that economic data released since then — better than expected job creation in July, rising retail sales and a recovering housing sector — actually pointed to a strengthening economy, meaning the Fed could find it hard to justify more easing.

The Fed makes its next interest rate announcement Sept. 14.

Equally important is the next interest rate announcement by the European Central Bank on Sept. 6. Gains on markets in August have also been anchored in hopes that the ECB will take steps to control high borrowing costs that have bedevilled the weakest members of the eurozone, including Spain.

Commodity prices were lower with the October crude contract down 87 cents to US$94.62 a barrel.

December copper lost early gains to move lower for a fifth day, closing two cents lower at US$3.45 a pound.

Bullion edged $5.90 lower to US$1,657.10 an ounce.