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Canadian dollar extends August's decline as boost fades from GDP gain
THE Canadian dollar weakened against its US counterpart on Friday, giving up gains it made after data showing stronger-than-expected GDP growth for the second quarter, as oil prices fell and the greenback broadly rallied.
The Canadian economy expanded at a surprisingly strong annualised rate of 3.7 per cent in the second quarter, a pace much higher than the Bank of Canada had predicted, thanks to a resurgence in goods exports, although business investment declined and growth in consumer spending slowed, Statistics Canada data indicated.
"The guts of the GDP report weren't as constructive as the initial headline appeared," said Bipan Rai, North America head of FX Strategy at CIBC Capital Markets. "We are getting some (US) dollar strength as well across the board. That might have been flow driven given that this is month-end."
The US dollar climbed against a basket of major currencies as the euro slumped to its weakest since May 2017.
Meanwhile, the price of oil, one of Canada's major exports, fell ahead of a hurricane near the Florida coast that could dampen demand. US crude oil futures settled 2.8 per cent lower at US$55.10 a barrel.
At 2.34 pm EDT (1834 GMT) Friday, the Canadian dollar was trading 0.3 per cent lower at 1.3325 to the greenback, or 75.05 US cents.
The currency, which was down one per cent for the month, traded in a range of 1.3247 to 1.3328.
Friday's decline for the loonie came ahead of a Bank of Canada policy announcement on Sept 4.
Whether the Bank of Canada waits until early 2020 to lower interest rates or does so this year has left economists polled by Reuters almost evenly divided, but they say the likelihood of a cut by year-end has increased dramatically from last month.
Canadian government bond prices were lower across a steeper yield curve, with the two-year down one Canadian cent to yield 1.353 per cent and the 10-year falling 15 Canadian cents to yield 1.164 .
Earlier this month, the 10-year yield hit its lowest level since October 2016 at 1.083 per cent. REUTERS