The Canadian dollar gained against a broadly stronger US counterpart on Friday as investor appetite for risk was restored due to Chinese and US economic data that was more robust than expected. The loonie, as the currency is colloquially known, gained more than 1 percent on the week, with much of that coming in the last two days.
But the bounce off lows last seen in March was an opportunity to buy cheaper US dollars for Bipan Rai, director of foreign exchange strategy at CIBC Capital Markets. "A 2 cent move over the last couple of days really doesn't seem that big in the grand scheme of things," he said, suggesting the Bank of Canada may surprise with a steeper-than-expected cut to growth forecasts when it presents a quarterly economic update next week.
In July, the central bank had anticipated 1.3 percent growth in 2016 and 2.2 percent growth next year. "We do know that a revision to the forecast is coming, it's all about the scale of that revision now," Rai said. The Canadian dollar settled at C$1.3145 to the greenback, or 76.07 US cents, stronger than Thursday's close of C$1.3205, or 75.73 US cents. The currency touched its strongest since October 3 at C$1.3104 during the session.
US retail sales and producer prices in September supported the view of a modest US economic expansion, which helped both currencies. A pickup in China's consumer prices eased concerns about the health of the world's second-largest economy after disappointing trade numbers on Thursday. Speculators cut bearish bets on the Canadian dollar, Commodity Futures Trading Commission data showed. Net short Canadian dollar positions dipped to 11,704 contracts in the week ended October 11 from 14,077 in the prior week. The loonie's normally tight link with the price of oil, one of Canada's major exports, has weakened ahead of the US presidential election and a potential interest rate hike by the Federal Reserve.
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