Canadian dollar lower amid strong Canadian, Chinese data, oilpatch concerns
The loonie was down 0.89 of a cent to 100.56 cents US ahead of next week's Bank of Canada interest rate announcement. (file image)
Published Friday, January 18, 2013 10:58AM CST
TORONTO -- The Canadian dollar was sharply lower Friday as the commodity-sensitive currency failed to benefit from solid Canadian and Chinese economic data.
The loonie was down 0.89 of a cent to 100.56 cents US ahead of next week's Bank of Canada interest rate announcement.
Statistics Canada says that manufacturing sales increased by 1.7 per cent in November to $49.9 billion. It was the highest level since May 2012 and better than the 1.1 per cent rise that economists had expected.
Other data showed that growth in China rose to 7.9 per cent in the three months ending in December, up from the previous quarter's 7.4 per cent.
For the year, the world's second-largest economy grew by 7.8 per cent, which was China's weakest annual performance since the 1990s.
The slowdown was due largely to government controls imposed to cool a real estate boom and surging inflation fuelled by Beijing's massive stimulus in response to the 2008 crisis. But it worsened as demand for Chinese exports dropped unexpectedly, raising the risk of job losses and unrest.
However, analysts say China could suffer a setback if exports weaken or the government fails to maintain investment spending that is propping up a recovery.
Traders also looked ahead to the Bank of Canada's announcement on interest rates on Wednesday for any indications on when the central bank may start raising rates.
The central bank also releases its Monetary Policy Report on Wednesday.
The dollar wasn't alone in losing ground against the greenback. Other cyclical currencies were also lower, including the Australian dollar and the Norwegian kroner.
But doubts about the future strength of the Canadian oilpatch also helped pressure the currency.
"I think the whole notion of the hiccups in the oilpatch is part of the issue," said Mark Chandler, Head of Canadian FIC Strategy at RBC Dominion Securities.
Oilsands giant Suncor Energy Inc. is to make a decision on whether to go ahead with its Voyageur heavy oil upgrader early this year.
CEO Steve Williams has previously said that burgeoning U.S. oil growths in regions such as North Dakota is putting pressure on the economics of the multibillion-dollar upgrader, which has been shelved since late 2008.
"It's important to note that we have seen a lot of stories about the big gap between Canadian crude prices and West Texas Intermediate and broader world benchmarks," added Chandler, "and that's beginning to weigh a bit on the oilpatch story."
Heavy crude, like that produced in the oilsands, has historically traded at a discount to WTI, a U.S. light oil benchmark priced at Cushing, Okla.
Recently, that price gap has at times widened to roughly $40 as pipeline bottlenecks prevent growing oilsands production from getting to the most lucrative markets.
Chandler also cited suspense over the future of the Keystone XL pipeline, which carry bitumen from the Alberta oilsands to U.S. refineries in the Gulf of Mexico.
U.S. president Barack Obama rejected the pipeline last year, but invited TransCanada (TSX:TRP) to file a new application with an altered route that would skirt an ecologically sensitive area in Nebraska.
TransCanada did that and is now waiting word on approval from the State Department.
Copper prices rose in the wake of the Chinese data. China is the world's biggest consumer of the metal which is viewed as an economic barometer as it is used in so many applications.
The March contract on the New York Mercantile Exchange was up one cent to US$3.67 a pound.
Oil prices were lower after jumping about $2 over the past two sessions after inventory data showed a sharp decrease in stocks last week. Prices also found support this week after Islamic militants seized an Algerian natural gas facility.
The February crude contract on the Nymex declined 32 cents to US$95.17 a barrel.
February bullion was off $3.30 to US$1,687.50 an ounce.