By Commodity News Service Canada
Winnipeg, August 21 – The Canadian dollar closed higher on Thursday as the U.S. dollar weakened slightly after minutes from the latest U.S. Federal Reserve meeting supported expectations that the central bank could hike rates earlier than expected next year, analysts said.
At 3:42 CDT Thursday afternoon, the loonie gained 0.22 of a cent to US$0.9137 or US$1 = C$1.0948.
The American currency lost momentum this morning amid positive U.S. economic data.
While the minutes from the Federal Reserve meeting indicated that the U.S. central bank is in no rush to hike rates, they also showed a greater dissension among Fed members on how fast the labour market is improving. This is a key element in determining when the Fed will raise rates from near zero, where they’ve been since the financial crisis.
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The preliminary Markit manufacturing purchasing managers index had a reading of 58 in August, jumping from 55.80 in July. This was the highest level since April 2010.
Other data showed that U.S. new homes sales rose for a fourth straight month to the highest level in nearly a year.
There was also positive news from Japan as there was a firm increase in Japan’s manufacturing PMI to 52.40 from 50.50 in July. This was ahead of expectations and the highest level since March.
The preliminary version of HSBC’s manufacturing index for China fell to a three-month low of 50.30 from 51.70 in July. This was an indication that manufacturing businesses are barely growing.
Canadian bonds ended moderately higher on Thursday as investors looked toward potential market-moving events in both Canada and the U.S. on Friday, including the keynote speech from the Fed’s chairwoman, Janet Yellen, at the central bank’s annual economic symposium in Jackson Hole, Wyoming. Canada’s two-year was at 1.089 per cent Thursday, from 1.092 per cent late Wednesday. The 10-year bond yielded 2.085 per cent from 2.102 per cent.
