Canadian dollar dips; on track for weekly gain as GDP rises

Canadian dollar pares weekly gain as bond yields climb

The Canadian dollar CADUSD weakened against its U.S. counterpart on Friday, but stayed on course for a modest weekly gain as equity markets rose and data showed surprise growth in the domestic economy.

The loonie was down 0.3 per cent at 1.36 to the greenback, or 73.48 U.S. cents, pulling back from its strongest intraday level in nearly five weeks on Thursday at 1.3493.

For the week, it was on track to advance 0.3 per cent as investors grew hopeful of a slowdown in Federal Reserve and European Central Bank interest rate increases.

U.S. benchmark the S&P 500 rose on Friday as wage growth showed signs of moderating and despite volatility in tech stocks.

The Canadian economy grew by 0.1 per cent in August, buoyed by strong agricultural and retail activity, with another 0.1 per cent increase likely in September and third quarter annualized GDP seen up 1.6 per cent, Statistics Canada said.

Analysts had forecast GDP would be flat in August.

Still, investors stuck with bets that the Bank of Canada would continue to slow the pace of interest rate hikes in December, pricing in a move of 25 basis points.

On Wednesday, the central bank hiked by half a percentage point, coming up short on calls for another 75 basis-points move.

The price of oil, one of Canada’s major exports, fell after top crude importer China widened its COVID-19 curbs, though benchmarks were poised for a weekly gain on supply concerns and surprisingly positive economic data.

U.S. crude prices were down 0.8 per cent at $88.33 a barrel.

Canadian government bond yields were higher across much of the curve, tracking the move in U.S. Treasuries.

The 10-year rose 2.1 basis points to 3.220 per cent after hitting on Thursday its lowest intraday level in more than three weeks at 3.176 per cent.

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