BUSINESS

Canadian dollar declines amid GDP disappointment, rising greenback

09/30/2014 08:43 EDT | Updated 11/30/2014 05:59 EST
TORONTO - The Canadian dollar closed lower Tuesday as economic growth figures for July came in weaker than expected.

The loonie was down 0.37 of a cent to a fresh, six month low of 89.29 cents US after Statistics Canada reported that gross domestic product was flat in July following a 0.3 per cent rise in June. Economists had expected that GDP growth would come in at 0.2 per cent.

The Canadian currency was also pressured by a greenback that has steadily appreciated this month amid positive American economic data and speculation about when the U.S. Federal Reserve may start to raise interest rates.

The currency has tumbled about two U.S. cents this month, pushing it to its lowest levels since the end of March.

Markets have generally looked for the Fed to raise rates around the middle of 2015, although the U.S. central bank has said its move will depend on economic data rather than a schedule.

Traders are looking for reassurance 'hat U.S. job growth continues to strengthen.

Markets looked for the U.S. government to report Friday that the American economy created about 210,000 jobs during September. It is also possible that the disappointing August report will be revised upward.

Canadian job figures for September come out Oct. 10.

The commodity-sensitive Canadian currency has also been pressured by prices that have weakened because of the rising U.S. dollar and weak Chinese data.

A stronger greenback makes it more expensive for holders of other currencies to buy oil and metals which are U.S.-dollar-denominated.

On Tuesday, HSBC Corp.’s monthly purchasing managers’ index showed that China’s manufacturing activity in September held steady at the previous month’s low level, indicating the world’s second-largest economy faces risks to growth. The index came in at 50.2. Anything below 50 indicates contraction.

At the same time, hopes for further stimulus from the European Central Bank rose after data showed that inflation across the 18 European Union countries that use the euro dipped further toward zero in September. Eurostat says that consumer prices in the eurozone rose only 0.3 per cent in the year to September against the previous month’s 0.4 per cent.

And in the U.S., other data showed deteriorating consumer confidence. The Conference Board's index fell to 86 during September from 93.4 in August.

Commodity prices also declined Tuesday as November crude in New York tumbled $3.41 to US$91.16. Lower demand and a glut of supply sent oil tumbling five per cent this month to its lowest closing price since November 2012.

December copper gave back five cents to US$3.01 a pound as lower demand pushed the metal viewed as an economic barometer down five per cent this month.

December gold faded $7.20 to US$1,211.60, losing almost six per cent this month amid low inflation readings in most parts of the globe.