TORONTO: The Canadian dollar firmed against the greenback on Friday after data showed the domestic economy grew at a faster-than-expected pace in the final months of last year.
Canada's economy expanded at a 2.9 percent annualized rate in the fourth quarter, surpassing the 2.5 percent economists had forecast. Growth for the first two quarters of 2013 was also revised higher.
"All told, a pretty decent quarter, which is a bit ahead of what the Bank of Canada had forecast," said David Tulk, chief Canada macro strategist at TD Securities in Toronto.
After some choppy reaction immediately after the report, the Canadian dollar strengthened. Investors also took in data south of the border that showed US growth in the fourth quarter was revised lower.
The Canadian dollar ended the North American session at C$1.1074 to the greenback, or 90.30 US cents, stronger than Thursday's close of C$1.1136, or 89.80 US cents.
The loonie also got some lift from investors squaring positions on the last day of the month, said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
"Markets came into month-end short Canadian dollar, so the fact that they were buying back some of those shorts throughout the morning is not a surprise," Anderson said.
The loonie firmed in the first three weeks of February, but dropped sharply last week after disappointing wholesale trade data and has been drifting sideways since. The greenback weakened 0.6 percent against the Canadian dollar for the month.
"I think this consolidation phase that we've been in since the beginning of February is probably something that won't go away any time soon. We're still likely to see a bit more sideways price action and even lower levels in US dollar-Canadian dollar, in my mind," said Greg Moore, senior currency strategist at Royal Bank of Canada in Toronto.
The Bank of Canada meets next week and is expected to hold rates at 1 percent. Investors will be watching the accompanying
statement closely for any changes in language.
"Given the fact that there's not really much ahead of the Bank of Canada meeting next week and expectations heading into that are fairly neutral - that they're not going to be able to change their message - suggests we're not going to get much new to drive the Canadian dollar lower," said Moore.
Canadian government bond prices were lower across the maturity curve, with the two-year off 2 Canadian cents to yield 1.001 percent and the benchmark 10-year down 17 Canadian cents to yield 2.433 percent.
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