Canadian dollar closes higher as economy continued to grow in November

Photo: The Canadian Press. All rights reserved.

Canadian dollars (loonies) are pictured in Vancouver, Sept. 22, 2011. THE CANADIAN PRESS/Jonathan Hayward

TORONTO - The Canadian dollar closed higher Friday amid data showing the economy continued to register respectable growth in November.

The loonie was ahead 0.22 of a cent to 89.78 cents US as Statistics Canada reported that gross domestic product grew by 0.2 per cent, which was in line with expectations. That was down slightly from a 0.3 per cent gain in October.

"The slowing in November GDP was not unexpected after very strong increases in October and September of 0.3 per cent," observed RBC Economics assistant chief economist Paul Ferley.

"There is the risk of a more pronounced slowing in December for which inclement weather in the final two weekends before Christmas may even result in activity declining marginally in the month."

The U.S. dollar had been higher earlier in the morning with traders in a risk-averse mood after data raised worries about the eurozone slipping into deflation.

Eurostat, the EU’s statistics office, reported that inflation in the eurozone fell to 0.7 per cent in the 12 months to January from 0.8 per cent the previous month.

There are concerns that the eurozone could slip into a situation where prices are actually falling. Such a development can hurt an economy as consumers delay purchases and businesses postpone investment.

The deflation concerns added to emerging market worries that have buffeted markets this past week.

Countries including Turkey, South Africa, India and Russia have seen their currencies slide sharply over the past week. Traders worry that growth will slow and money will flow out of their economies as the U.S. Federal Reserve tightens its monetary policy.

Other economic data released Friday showed that U.S. consumer spending rose 0.4 per cent in December, compared with November when spending had increased an even stronger 0.6 per cent. That was the best gain in five months.

For all of 2013, income growth was 2.8 per cent, the weakest performance since 2009.

On the commodity markets, March crude in New York fell 74 cents to US$97.49 a barrel.

March copper lost three cents to US$3.20 a pound while April gold moved $2.70 lower to US$1,239.80 an ounce.