BUSINESS

Loonie moves up more than half a cent following BoC interest rate comment

10/04/2012 09:04 EDT | Updated 12/04/2012 05:12 EST
TORONTO - The Canadian dollar moved higher Thursday after a top Bank of Canada official suggested that rising interest rates are still a medium-term possibility.

The loonie rose 0.79 of a cent to 101.99 cents US, with a better than expected reading on jobless claims out of the U.S. adding to the climb. The currency has risen from the lowest levels it has tested in a month, reached on Wednesday.

The direction of interest rates returned to the forefront after BoC deputy governor Tiff Macklem reiterated a statement made earlier by the central bank, saying that some modest withdrawal of the existing monetary policy stimulus could be appropriate.

"The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments," Macklem said in notes on the speech released in Ottawa.

His comments came as economists suggest that Canada continues to be buffeted by economic instability in Europe, and a slow economic recovery in the United States.

Meanwhile, the U.S. Labour Department said that initial jobless claims rose last week to a seasonally-adjusted 367,000, which was better than expectations but still consistent with only modest hires.

The data on claims for unemployment benefits came a day before the U.S. government's closely watched monthly employment report. Canadian employment numbers are also slated for Friday.

Overseas, the European Central Bank kept its benchmark interest rate unchanged at a record low 0.75 per cent. Investors are also awaiting news from the ECB's monthly policy meeting.

"With payroll numbers out tomorrow morning and a long Canadian holiday weekend approaching, I suspect we remain relatively range bound," Matt Perrier, director of foreign exchange sales at BMO Capital Markets, said in a note.

In commodities, November crude on the New York Mercantile Exchange moved up $3.57 to close at US$91.71 a barrel.

December bullion rose $16.70 to US$1,796.50 an ounce, while December copper was ahead 0.2 of a cent at US$3.79 a pound.