TORONTO – Surging oil prices helped push the Canadian dollar slightly higher Tuesday even as more data showed that global economic growth continues to slow.
The loonie edged up 0.03 of a cent to 102.19 cents US as the American currency attracted investors amid a report from the International Monetary Fund that downside economic risks have increased and are considerable.
It said Tuesday in a quarterly update of its World Economic Outlook that the global economy will expand 3.3 per cent this year, down from the estimate of 3.5 per cent growth it issued in July. Its forecast for growth in 2013 is 3.6 per cent, down from 3.9 per cent three months ago and 4.1 per cent in April.
“This is not surprising, especially when pitted against private sector forecasts which have been much more pessimistic — though significant nonetheless,” said Mark Chandler, head of Canadian FIC strategy at RBC Dominion Securities.
The IMF added that the global economic malaise is spreading to more dynamic emerging economies such as China.
It said that China’s economy will likely expand 7.8 per cent this year, down from July’s eight per cent forecast.
Commodity prices were mixed after registering losses Monday in the wake of a pessimistic outlook from the World Bank. The organization cut its forecasts for economic expansion in East Asia, saying it expected the region to grow by 7.2 per cent in 2012, down from a projection of 7.6 per cent in May.
On Tuesday, the November crude contract on the New York Mercantile Exchange rose $3.06 to US$92.39 a barrel.
Oil had slipped the previous three sessions but found support Tuesday, partly on supply concerns linked to the Syrian conflict. A report from Commerzbank in Frankfurt cited the possibility of Turkey becoming involved in the conflict.
December gold gave up early advances to decline $10.70 to US$1,765 an ounce. Gains in copper also faded as the December contract was unchanged at US$3.72 a pound following a six-cent drop Monday.
The loonie had been well into positive territory earlier in the morning amid some positive news from the housing sector. Canada Mortgage and Housing Corp. said housing starts came in at an annualized rate of 220,000 in September. That was much stronger than the 205,000 that economists had expected.
However, economists believe that robust pace won’t continue for long.
“Looking forward, we expect the recent signs of cooling secondary market demand to gradually filter into a slowdown in housing construction, weighed down further by the diminishing impetus to homebuilding from low (interest) rates,” said CIBC World Markets economist Emanuella Enenajor.