BUSINESS

Loonie down, incoming Fed chair says economy too weak to withdraw stimulus

11/14/2013 09:04 EST | Updated 01/23/2014 06:58 EST
TORONTO - The Canadian dollar closed lower Thursday as traders took in data showing that the country's trade deficit narrowed far more than expected in September.

The loonie was down 0.05 of a cent at 95.53 cents US, but off early lows as the greenback weakened somewhat against other currencies.

Statistics Canada said the trade deficit with the world narrowed to $435 million in September from a revised $1.1 billion in August .

Economists had largely expected the deficit to come in at $1.1 billion.

The agency reported that merchandise exports grew 1.8 per cent while imports edged up 0.2 per cent in September.

The other major item on the economic calendar for the week is September manufacturing shipments, which will be released on Friday.

The U.S. currency eased during confirmation hearings on Janet Yellen's nomination to lead the Federal Reserve.

Yellen's prepared remarks were released Wednesday after the market close and they indicated she won't be straying from the low interest rate policies of outgoing chairman Ben Bernanke.

She said the economy has regained ground lost to the recession, but that unemployment remains too high.

Later, during a question and answer session with senators, Yellen said the Fed understands that quantitative easing involving the monthly purchase of US$85 billion of bonds can’t go on forever.

But she made it clear that "it is important not to remove support while the recovery is still fragile."

Yellen added that "it is also important to remove accommodation when the right time comes."

A strong rally on markets in October has largely stalled this month on concerns that the Fed could start tapering as soon as next month. The Fed's bond purchases have kept long-term rates low and supported a strong advance on many markets.

Commodities were mixed with December crude on the New York Mercantile Exchange down 12 cents to US$93.18 a barrel after U.S. Energy Department data for last week showed that crude supplies rose by 2.6 million barrels against an expected increase of 1.8 million barrels.

Copper was unchanged at US$3.16 a pound after losing ground for the past two days, reflecting disappointment that a meeting of Chinese leaders earlier this week failed to yield hoped-for economic reforms.

Bullion prices advanced with December gold ahead $17.90 to US$1,286.30 an ounce.

Meanwhile, official figures showed that the recovery from recession in the 17-country eurozone continued in the third-quarter — but only just. Eurostat, the EU’s statistics agency, said Thursday that the region posted economic growth of 0.1 per cent in the July-to-September period compared with the previous three-month period. That was in line with market expectations but below the previous quarter’s 0.3 per cent growth.