TORONTO – The Canadian dollar climbed more than half a cent Wednesday amid reports showing a strengthening of the U.S. economy and anticipation of possible action from China’s leaders to encourage growth.
The Canadian dollar gained 0.61 of a cent to 90.22 cents US.
The U.S. Commerce Department reported that orders to factories for durable goods rose in February by the most in three months, but a key category that reflects business investment fell 1.3 per cent, the second setback in three months.
It’s believed that the weakness in business investment may have been due to severe winter weather conditions in the United States last month, which may have caused some to put modernization and expansion plans on hold.
Overall, orders for durable goods rose 2.2 per cent after a 1.3 per cent drop in January. The increase was driven mainly by a surge in orders for commercial aircraft, a category that tends to fluctuate sharply from month to month.
Joel Naroff, chief economists at Naroff Economic Advisors, said he expects economic growth to slow sharply in the January-March quarter, reflecting the disruptions caused by the harsh weather, before recovering in coming months.
“The rebound could be huge once spring actually appears,” Naroff said.
Overseas, European Central Bank president Mario Draghi said Tuesday that monetary policy should support the economies of countries that use the euro.
“This is a clear sign that the ECB will continue to hold its finger over the rates button,” IG strategist Evan Lucas said in a commentary.
“The bank is looking to find a way to chase out funds locked up in wealth products that will then be redirected to areas of the economy that are looking for growth funding.”
Meanwhile, investors are anticipating that Chinese leaders will introduce stimulus measures after a preliminary reading of China’s manufacturing, released Monday, showed activity at an eight-month low in March.
Last week, the Canadian dollar was under pressure as the U.S. Federal Reserve said it could start raising short-term interest rates as soon as next year. At the same time, Bank of Canada governor Stephen Poloz said interest rate hikes in Canada could be further away than first thought.
Commodities were higher as May crude on the New York Mercantile Exchange climbed $1.07 to US$100.26 a barrel.
June bullion fell $8 to US$1,303.40 an ounce while May copper dipped four cents to US$2.97 a pound.