Loonie Edges Higher & U.S. Posts Good News on Employment in the Service Sector

Canadian dollar heads higher amid strong American data on jobs, service sector

Malcolm Morrison, The Canadian Press, On Wednesday January 5, 2011
Article From: www.yahoo.ca

TORONTO - The Canadian dollar moved higher against the American currency Wednesday amid good news on employment and expansion in the U.S. service sector.

The greenback gained against other currencies but the loonie ended the session up 0.21 of a cent to 100.36 cents US.

The Canadian currency had been below parity earlier in the day but strengthened after U.S. payroll company ADP estimated that the American economy created 297,000 jobs during December.

That’s nearly higher than the general forecast by economists.

“The Canadian dollar is doing better because a good U.S. number should be good for Canada,” said John Curran, senior vice-president at CanadianForex.

“If you get a good number out of the U.S., it’s going to basically flow into Canada at some point.”

The ADP data was released two days before the release of the U.S. non-farm payrolls report for December. Economists expect the official data to show that the U.S. economy created about 150,000 jobs during December.

Other data showed a strong reading in the Institute for Supply Management’s non-manufacturing index for December, which rose to 57.1, a faster pace of expansion than the 55.3 reading that was expected.

On Monday, the ISM’s manufacturing index for December came in at a six-month high of 57, which raised hopes for economic growth in the neighbourhood of four per cent.

Also supporting the loonie was a turnaround in oil and copper prices.

Oil prices started to turn around amid data showing a larger than forecast drop in U.S. oil consumption last week, pushing the February contract on the New York Mercantile Exchange ahead 92 cents to US$90.30 a barrel.

The U.S. Energy Information Administration reported a bigger than expected decline in U.S. crude-oil inventories for last week, dropping 4.2 million barrels, almost double the decline that analysts had expected.

Copper finished higher with the March contract on the Nymex up four cents to US$4.41 a pound while gold prices continued to fall back as the positive economic data strengthened the U.S. dollar against many currencies and persuaded investors to trim their bullion holdings. The February bullion contract in New York lost $5.10 to US$1,373.70 an ounce.