Loonie heads higher despite disappointing Chinese manufacturing data

TORONTO – The Canadian dollar headed higher Thursday despite weaker-than-expected manufacturing data from China.

The loonie climbed 0.73 of a cent to 97.14 cents US.

HSBC reported that its preliminary Purchasing Managers Index fell to a seven-month low of 49.6 in May from April’s 50.4. Numbers below 50 indicate that activity is contracting. Analysts had expected a more modest decline to 50.3.

The disappointing data had spurred concerns over the future outlook for commodities, like copper.

“People, I think, are selling equities and taking comfort in either bonds or currencies because the Canadian dollar was weaker yesterday,” said John Tsagarelis, a portfolio manager at Manulife Asset Management.

But he added that if the Chinese data continues to worsen, the Canadian dollar will likely follow.

“Given what’s happening in China, I can’t imagine if commodities are weakened, the Canadian dollar will stay where it is,” said Tsagarelis.

The loonie has been declining against the strong U.S. dollar, with some expecting the currency to stray further from parity, a position it was close to just a few weeks ago.

On the commodities front, June gold bullion continued to show strength, rising $24.40 to US$1,391.80 an ounce. The July crude contract was down three cents to US$94.25 a barrel, while July copper fell eight cents to $3.30 a pound.