Canadian dollar lower after domestic GDP data

Fri Oct 30, 9:44 AM
TORONTO (Reuters) - Canada's dollar was lower against the U.S. currency on Friday after news that gross domestic product unexpectedly shrank in August, putting in doubt the Bank of Canada's forecast for third-quarter growth.
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(Reuters)

TORONTO (Reuters) - Canada's dollar was lower against the U.S. currency on Friday after news that gross domestic product unexpectedly shrank in August, putting in doubt the Bank of Canada's forecast for third-quarter growth.

Statistics Canada said on Friday gross domestic product contracted by 0.1 percent in August from July. Analysts polled by Reuters had expected a 0.1 percent increase after unchanged growth in July.

"The view remains that the Bank of Canada is on hold until the third quarter of next year at the earliest for the first (interest rate) hike. This kind of GDP print is tracking well below the Bank of Canada's expectations for the start of the recovery," said Derek Holt, economist at Scotia Capital.

The central bank has predicted annualized growth of 2.0 percent in the third quarter, he added.

"After being flat in July and down in August they're going to need a record-breaking number in September to come even close," said Holt.

After the report, the Canadian currency fell as low as C$1.0808 to the U.S. dollar, or 92.52 U.S. cents.

At 9:16 a.m. (1316 GMT), the Canadian unit was at C$1.0783 to the U.S. dollar, or 92.74 U.S. cents, down from C$1.0670 to the U.S. dollar, or 93.72 U.S. cents, at Thursday's close.

A general lack of investor appetite for riskier assets also pressured the currency, said Holt.

"All the asset classes are off a little bit," he said. "There's a bit of an unwinding from yesterday's Q3 GDP report in the States."

U.S. stocks sagged on Friday morning, a day after the market logged its best percentage gain in three months, boosted in part on the data that showed the U.S. economy grew faster than expected in the third quarter.

BOND PRICES HIGHER

Domestic bond prices were higher across the curve following the Canadian GDP data and also moved alongside the bigger U.S. Treasury market.

The two-year bond ticked 8 Canadian cents higher to C$99.63 to yield 1.434 percent, while the 10-year bond climbed 40 Canadian cents to C$102.40 to yield 3.453 percent.

(Reporting by Jennifer Kwan; Editing by James Dalgleish)