Canada’s currency, nicknamed the loonie, is poised for a 3.8 percent gain in the last three months, the fourth consecutive quarterly advance and the longest streak since 1988. Gross domestic product increased 0.6 percent from December, the fifth straight gain and the biggest since December 2006, Statistics Canada said today in Ottawa.
“It’s become typical for data from the Canadian economy to surprise on the upside and strong economic performance pushes the currency higher,” said Aaron Fennell, a futures and currency broker in Toronto at Lind-Waldock, a unit of MF Global Canada. “Looking further into the future, it’s hard to see the Canadian economy and dollar not doing well. It’s a structural bull market for the next decade.”
The Canadian currency appreciated 0.5 percent to C$1.0151 per U.S. dollar at 2:19 p.m. in Toronto, from C$1.0201 yesterday. It touched C$1.0130, the strongest level since March 19. One Canadian dollar buys 98.51 U.S. cents.
Crude for May delivery rose 1.5 percent to $83.62 a barrel on the New York Mercantile Exchange. The Standard & Poor’s 500 Index rose less than 0.1 percent. The loonie tends to track commodities and equities.
‘Solid Momentum’
Economists surveyed by Bloomberg News had predicted the economy would expand 0.5 percent in the first month of 2010, according to the median of 20 estimates.
The report suggests first-quarter economic growth is still coming in faster than the Bank of Canada predicted, after output expanded at the highest quarterly rate since 2000 in the October-December period.
“There are some good signs, there are some consistent signs,” in Canada’s economy, Finance Minister Jim Flaherty told reporters in Ottawa today. “It’s too early to say that we are out of the woods yet.”
Governor Mark Carney signaled last week the central bank may raise interest rates as soon as June as inflation and growth outpace forecasts.
The GDP report “starts the first quarter with solid momentum and fits with that positive vibe the Canadian economy has had for some time,” said David Watt, senior currency strategist in Toronto at Royal Bank of Canada, Canada’s biggest bank. “The takeaway should be positive.”
‘Pressing Parity’
The loonie reached C$1.0062 on March 19, the strongest level since July 23, 2008. The currency rose to parity with the greenback in September 2007 for the first time in three decades amid booming demand for raw materials. It was last at parity on July 22, 2008, and then lost 18 percent that year as the credit crisis crushed demand for commodities.
“The Bank of Canada has been on record saying they’re looking to raise interest rates and tighten liquidity, and there hasn’t been anything to indicate they shouldn’t,” said Lind- Waldock’s Fennell. “That’s why the Canadian dollar is pressing parity. The last time we saw parity a few years ago it didn’t stick. This time it will be a permanent move.”
An hourly close, or a price below the C$1.0154 resistance level at the beginning and end of any given hour of trading, could push the Canadian dollar to C$1.0091 and C$1.0064, George Davis, chief technical analyst in Toronto at Royal Bank of Canada, wrote in a research note.
Resistance refers to areas on charts where buy or sell orders may be clustered and signals a currency may move to the next level if it is exceeded.
