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Canadian dollar gains as manufacturing strength cheers investors

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar edged higher against its U.S. counterpart on Thursday, the start of a seasonally strong month for the currency, as oil rose and domestic data showed factory activity expanding at a record pace in March.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) rose to a seasonally adjusted 58.5 in March from 54.8 in February, posting the highest reading in the 10-year history of the survey.

A measure of U.S. manufacturing activity for March was also robust, soaring to its highest level in more than 37 years. Canada sends about 75% of its exports to the United States, including oil.

“The demand story for manufactured goods and raw materials continues to heat up,” said Adam Button, chief currency analyst at ForexLive. “For an exporter like Canada, it bodes well for many months ahead.”

Separate data from Statistics Canada showed that the value of building permits rose by 2.1% in February from a month earlier, beating expectations of a 1.4% decline.

Analysts have raised their Canadian dollar forecasts for the coming year, expecting the currency to benefit from faster growth in the domestic economy and a potential reduction of Bank of Canada bond purchases, a Reuters poll showed.

The Canadian dollar was trading 0.1% higher at 1.2547 to the greenback, or 79.70 U.S. cents. The currency has gained ground in eight of the last 10 Aprils.

“The seasonal tailwind in the Canadian dollar is undeniable in April and we may be seeing a reflection of that today,” Button said.

U.S. crude oil futures settled 3.9% higher at $61.45 a barrel after news that OPEC+ reached a deal to gradually ease production cuts from May.

Canada‘s 10-year yield eased 4.7 basis points to 1.513%, with the bond market closing early ahead of the Good Friday holiday.

 

(Reporting by Fergal Smith; Editing by Kirsten Donovan; editing by Grant McCool)

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Canadian dollar notches biggest gain in a month as stocks rally

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The Canadian dollar strengthened to a one-week high against its U.S. counterpart on Thursday as investor sentiment picked up and domestic data showed that retail sales fell less than expected in July.

World stock markets rallied and the safe-haven U.S. dollar retreated from one-month highs as worries about contagion from property developer China Evergrande eased and investors digested the Federal Reserve’s plans for reining in the stimulus.

Canada is a major exporter of commodities, including oil, so the loonie tends to be particularly sensitive to investor appetite for risk.

“The assumption here is that (Fed interest) rate hikes are still a long way out and so equities markets can still perform with accommodative financial conditions,” said Mazen Issa, senior FX strategist at TD Securities in New York.

“Consequently, currencies that have a higher beta to the equity market, like the CAD, can do alright.”

U.S. crude oil futures settled 1.5% higher at $73.30 a barrel, while the Canadian dollar was trading up 0.9% at 1.2653 to the greenback, or 79.03 U.S. cents.

It was the currency’s biggest advance since Aug. 23. It touched its strongest level since last Thursday at 1.2628.

Canadian retail sales dipped 0.6% in July, compared with expectations for a decline of 1.2%, while a preliminary estimate showed sales rebounding 2.1% in August.

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

The 10-year touched its highest level since July 14 at 1.335% before dipping to 1.330%, up 11.6 basis points on the day.

(Reporting by Fergal Smith; Editing by Nick Zieminski and Peter Cooney)

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China Vows Better Policy Support to Economy as Headwinds Mount – BNN

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(Bloomberg) — Chinese policy makers reiterated the need to fine-tune economic policies as the world’s second-largest economy faces increasing headwinds from virus outbreaks and high commodity prices. 

Policy should be preemptive and coordinated across cycles, the State Council, the equivalent of China’s cabinet, said in a statement after a meeting chaired by Premier Li Keqiang Wednesday. Governments at all levels should maintain the continuity and stability of macroeconomic policies and enhance their effectiveness, while also do a good job in preventing and controlling virus cases, it said.

Efforts are needed to better coordinate fiscal, financial and employment policies in order to “stabilize reasonable expectations by the market,” it said. 

China again vowed to make sure the economy is operating within a reasonable range, with further measures to boost consumption, guiding private capital to play a better role in expanding investment, and ensuring stable growth in foreign trade and foreign capital, according to the statement. While the employment situation is stable this year, efforts are still needed to maintain employment and help companies, it said. 

The economy took a knock in August from stringent virus controls and tight curbs on property. While China’s Covid zero approach helped to quickly quash the infections, retail sales growth suffered, slowing to 2.5% in August. 

Facing the continued commodity boom, the State Council also pledged to use more market-based measures to stabilize commodity prices and ensure supplies of power and natural gas during the winter. 

©2021 Bloomberg L.P.

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UAE Says It's Unwinding Pandemic Stimulus as Economy Recovers – Bloomberg

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The United Arab Emirates has begun winding down an economic support program launched in response to the coronavirus pandemic as the economy shows signs of gradual recovery, the central bank said in a statement.

The reduced reserve requirements for banks won’t change for now and neither will the lower loan-to-value ratio required for first-time home buyers seeking mortgage loans, the bank said. The loan deferral component of the Targeted Economic Support Scheme will expire by the end of 2021 with financial institutions able to carry on tapping a collateralized 50-billion-dirham ($13.6 billion) liquidity facility until the middle of 2022, in line with earlier guidance.

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