Surplus buoys Canadian dollar of Canada
Toronto, Sep. 28, 2007
Kuljit Singh, Accredited Mortgage Professional
September 27, 2007 at 11:42 AM EDT
TAVIA GRANT
Globe and Mail
The Canadian dollar remained stronger Thursday after the federal government announced a larger-than-expected surplus and as a weak U.S. home sales report sent the greenback lower against other global currencies.
The loonie, which had vaulted back above parity earlier, traded at 99.79 cents (U.S.) from Wednesday's close of 99.58 cents after rising above parity earlier.
The Canadian government estimated the surplus swelled to about $14-billion in the last fiscal year, far greater than the $9.2-billion forecast in the last budget.
The loonie got a lift on expectations that much larger surplus might eventually spark a tax-cut announcement.
Much of the loonie's move, though, can be traced to another round of U.S. dollar weakness. The greenback fell to a record low against the euro Thursday, as a report showed U.S. new home sales sank to a seven-year low.
The currency is headed for its biggest quarterly slump against the euro and yen in almost three years, according to Bloomberg. The greenback has weakened against 15 of the 16 most-active currencies since June 30, the news agency said.
The Canadian dollar hit parity for the first time in 31 years last Thursday, bolstered by strong commodity prices, robust economic data and general weakness in the U.S. dollar.
“The broader theme remains U.S. dollar weakness and with oil once again climbing higher, the U.S. dollar should be pressured lower” against the Canadian dollar, said the Bank of Nova Scotia.
Currency strategists are awaiting Friday's gross domestic product report for July for more clues on the health of the Canadian economy.
In the U.S., new-homes sales tumbled in August, a sign that the credit crunch is aggravating an already painful housing slump.
Sales of new homes dropped 8.3 per cent in August from July, the Commerce Department reported Thursday, driving down sales to a seasonally adjusted annual rate of 795,000 units. That was the lowest level since June 2000.
The home sales report came on the same day that the U.S. government reported a relatively brisk business growth rate in revised figures for the second quarter. But the 3.8 per cent GDP figure was less than first estimated and it occurred before the credit crisis and its repercussions across the broad spectrum of the economy had taken hold.
With files from reporter Steven Chase and the Associated Press.