Loonie notches weekly gain as investors look past bleak data
By Fergal Smith
TORONTO (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Friday but largely kept hold of this week's rally as investors took in stride bleak domestic GDP data and looked ahead to a policy decision next week from the Bank of Canada.
The loonie was trading 0.1% lower at 1.3775 to the greenback, or 72.60 U.S. cents. The currency touched its strongest intraday level since March 12 at 1.3714.
For the week, the loonie was up 1.6% as investors grew more optimistic about economic recovery, while it ended higher for the second straight month.
Canada's GDP fell at an annualized rate of 8.2% in the first quarter and an estimated 11% month-over-month in April, when the coronavirus outbreak shuttered non-essential businesses across the country. [
"Our expectation is for a 40% plunge in Q2 as the economy is devastated by the lockdowns," said Ryan Brecht, a senior economist at Action Economics. "The easing of those measures so far in May suggests that the economy bottomed out in April."
The price of oil, one of Canada's major exports, was bolstered by growing fuel demand even as investors worried about worsening Washington-Beijing relations. U.S. crude oil futures settled 5.3% higher at $35.49 a barrel.
A Bank of Canada interest rate decision is set for next Wednesday, when Tiff Macklem will take over as governor. The current governor, Stephen Poloz, is due to retire next Tuesday.
"Poloz on the way out has generally been quite optimistic," said Amo Sahota, director at Klarity FX in San Francisco. "Are we going to get a change in tone?"
Canada's central bank will hold interest rates at a record low of 0.25% until at least the end of next year, a Reuters poll showed.
Canada's 10-year government bond yield eased 2.4 basis points to 0.536%.
(Reporting by Fergal Smith; Editing by Paul Simao and Grant McCool)
