TORONTO – The Canadian dollar climbed Monday as the U.S. dollar weakened on news that one of the top candidates to lead the Federal Reserve has withdrawn from the race.
The Canadian dollar was stronger, up 0.20 of a cent to 96.85 cents US.
Economist Lawrence Summers had long been perceived as an opponent to the Fed’s aggressive bond-buying program, which has helped push down interest rates to spur lending and jump-start economic growth following the financial and economic crisis five years ago. The program, dubbed quantitative easing, has also weakened the dollar and boosted stock markets.
Summers’ withdrawal to succeed current Fed chairman Ben Bernanke means Janet Yellen, a Fed vice-chair and supporter of the stimulus program, may be next in line for the top job. The other choices, including Bernanke himself, are all considered dovish in nature.
Nevertheless, there may be big changes afoot at the U.S. central bank, as seven of the 12 voting members could potentially change.
“It is very much external elements that are driving (the loonie) modestly higher,” said Paul Ferley, assistant chief economist at the Royal Bank of Canada.
Ferley said Summers is perceived to have an aggressive stance on U.S. monetary policy.
“That move is being reversed now so we’re seeing a bit of a weakening in the U.S. dollar, and less prospects that interest rates will go up and, with that, Canada is benefiting and appreciating modestly.”
The Canadian dollar was under pressure last week as worries over Syria eased and commodity prices have waned.
On Monday, United Nations inspectors said it had “clear and convincing evidence”‘ that chemical weapons were used on a relatively large scale in an attack last month in Syria that killed hundreds of people.
The findings represent the first official confirmation by scientific experts that chemical weapons have been used in Syria’s civil war, but the report left the key question of who launched the attack unanswered.
The rebels and their U.S. and western supporters have said the government of President Bashar Assad was behind the Aug. 21 attack, while Damascus and its closest ally, Russia, blame the rebels.
Meanwhile, commodities were mixed as the October crude contract dipped $1.62 to US$106.59 a barrel. December gold bullion saw an uptick of $9.20 to US$1,317.80 an ounce. December copper was up two cents at US$3.22 a pound.
In economic news, U.S. factories increased output in August by the most in eight months, helped by a robust month at auto plants. The gains are a hopeful sign that manufacturing could help boost economic growth in the second half of the year.
Manufacturing production rose 0.7 per cent last month from July — the biggest increase since December. It followed a 0.4 per cent decline in July.
Factory output is the largest component of industrial production. The strong gain adds to other signs that manufacturing could be rebounding from a weak start this year.