Loonie Up against US Dollar on US Manufacturing Data

By TraderVox.com

Tradervox.com (Dublin) – The loonie advanced against the greenback and most peers after a report from the US showed that the US manufacturing sector unexpectedly expanded, boosting demand for commodity related currencies as risk appetite grew. Signs of growth in the US boost Canadian currency, since US is the Canada’s largest trading partner. The risk sentiment in the market and data showing faster growth in Canada than earlier reported pushed the loonie up against major peers in the market.

Statistics Canada released its revised economic data yesterday, which indicated a faster growth and crude oil continued with its advance for the third day in a row reversing earlier declines. Adam Button said that the expansion indicated in the manufacturing sector indicates an increased demand for raw materials in the US, which is positive for the Canadian dollar. Adam, who is a currency analyst at Forexlive.com in Montreal, noted that when the US stocks move up the Canadian dollar moves up as well. Crude oil futures advanced by 0.2 percent to 492.35 a barrel in New York yesterday, after they fell by one percent earlier in the day.

One-month implied volatility options for the dollar-loonie exchange rate advanced by 7 percent yesterday, the highest since August 30. Implied volatility is quoted by traders to set option prices and it signals the projected rate of currency swings. The advance came as the Institute of Supply Management report indicated that the US Factory index rose to 51.5 in September from the 49.6 level registered in August. According to a report by Statistics Canada, raw material prices rose more than forecast in August and the prices for their products declined in the same month. The raw material-price index rose by 3.4 percent which is more than the 1.2 percent rise predicted by most market analysts.

The Canadian currency rose by 0.1 percent against the dollar to trade at 98.23 Cents per US dollar at the close of day in Toronto. This rise was supported by GDP review data which showed that the Canadian economy grew by 1.9 percent on the year as opposed to the previous reading of 1.8 percent.

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