BUSINESS

Canadian dollar rebounds as gold prices hit new seven-month high

09/27/2012 08:45 EDT | Updated 11/27/2012 05:12 EST
TORONTO - The Canadian dollar closed nearly half a cent higher Thursday as gold hit a seven-month high and Spain announced severe budget cuts intended to convince the world that it can meet deficit-reduction targets.

The loonie gained 0.45 of a cent to 101.95 cents U.S.

Gold prices gained more than one per cent Thursday, adding $26.90 to hit a new seven-month high of US$1,780.50 an ounce. The last time it traded at that level was Feb. 28.

The benchmark New York oil contract was ahead $1.87 at US$91.85 a barrel, while the December copper contract was three cents higher at US$3.74 a pound. The mining sector on the Toronto Stock Exchange was also ahead two per cent.

Amid fear that Spain will need an international bailout, the country's finance minister said a draft budget for 2013 cuts overall spending by €40 billion, or about $51 billion. He said cuts for ministries would average almost nine per cent.

The cuts are meant to show investors and other countries that Spain can meet its fiscal targets.

Improved sentiment is also being helped by expectations the People's Bank of China will soon take more steps to ease a slowdown in the world's No. 2 economy.

Traders also took in data showing the U.S. economy grew at a 1.3 per cent rate in April-June quarter, weaker than previous estimates and another report suggesting U.S. durable goods orders dropped 13.2 per cent in August, the biggest decline in more than three years.

Meanwhile,the number of Americans seeking unemployment benefits fell 26,000 last week to 359,000, the lowest figure in nine weeks. A figure consistently below 375,000 is generally enough to lower the unemployment rate.

The number of Americans who signed contracts to buy previously occupied homes fell in August from a two-year high in July. The National Association of Realtors' sales index is still 10 per cent higher than it was a year ago.

In Canada, traders took in a Statistics Canada report that the average weekly earnings for non-farm payroll employees was $906.68 in July, up 1.1 per cent from the previous month.

Traders are also looking ahead to Friday's report on Canadian GDP figures for July.