* C$ ends at C$1.0271 to US$, or 97.36 U.S. cents
* Currency helped by GDP data; weak but as forecast
* C$ early hit C$1.0343, weakest since June
By Solarina Ho
TORONTO, March 1 The Canadian dollar
strengthened on Friday, rebounding from an early decline to its
lowest level since late June, after fourth-quarter domestic
growth data came in as forecast.
The Canadian economy chalked up another quarter of weak
growth at the end of 2012, and shrank 0.2 percent in December
for its first monthly decline since February 2012.
But because economists had sharply lowered their
expectations in recent weeks, the currency actually strengthened
after the numbers were released.
"A lot of investors were going into the data thinking it
would be even worse," said Charles St-Arnaud, Canadian economist
and currency strategist at Nomura Securities International in
In the medium term, however, St-Arnaud said he expected to
see more weakness in the Canadian dollar. He said one factor
weighing on the currency is that Canada keeps importing oil for
Eastern refineries at a higher price than it exports from
"Everything seems to be pointing to very weak growth in the
next few quarters," he said.
The Canadian dollar finished the North American
session at C$1.0271 to the greenback, or 97.36 U.S. cents,
compared with C$1.0314, or 96.96 U.S. cents, at Thursday's North
The currency dropped sharply overnight, hitting C$1.0343,
its weakest level since June 28.
The loonie, as Canada's currency is known colloquially, has
weakened against the U.S. dollar since mid-February, when the
pair were changing hands at equal value.
The rise of Canada's dollar against the U.S. dollar on
Friday came as the greenback strengthened versus a basket of
currencies following weak euro zone and Asian economic data,
which contrasted with more healthy U.S. economic gauges.
Canada also outperformed most major currencies, including
sterling, against which it was trading near levels not seen
since September 2011.
Traders are now looking ahead to the Bank of Canada's next
interest rate decision on Wednesday.
The central bank is seen as all but certain to hold its
benchmark interest rate steady at 1 percent, so investors will
focus on any changes to the language used in its policy
The Bank of Canada adopted a more hawkish stance last April,
warning its next rate move would be an increase. But the ongoing
debt crisis in Europe, U.S. budget battles and lackluster growth
at home have combined to stay its hand. In January, the bank
said that withdrawal of monetary policy stimulus was "less
imminent than previously anticipated".
The recent run of poor Canadian data has fueled speculation
the central bank will tone its language down even further or
could even drop its tightening bias.
"If they remove the forward language that would probably be
negative for the Canadian dollar," St-Arnaud said.
Canadian government bond prices rose across the curve. The
two-year bond rose 2.3 Canadian cents to yield 0.941
percent, while the benchmark 10-year bond rose 31
Canadian cents to yield 1.804 percent.