TORONTO - The Canadian dollar closed higher Monday, ahead of a mid-week announcement on interest rates and the economy from the Bank of Canada.
The loonie was well off the highs of the session but still ahead 0.21 of a cent to 91.32 cents US on a relatively quiet day with U.S. markets closed for the Martin Luther King holiday.
Traders will be looking for any change in the Bank of Canada's language about interest rates on Wednesday, along with it's latest take on the economy in its Monetary Policy Report.
The central bank has dropped language that suggested it was biased towards raising rates and adopted a neutral stance, although some observers believe it may ease its monetary policy and lower rates.
"We believe the rate meeting and MPR will reaffirm a dovish tone, but the central bank is likely to stop short of instituting an official easing bias," said Mark Chandler, head of Canadian FIC Strategy at RBC Dominion Securities.
Markets will also digest other major economic data this week. Statistics Canada releases data on manufacturing shipments for November on Tuesday, November retail sales on Thursday and the December reading on inflation on Friday.
January has been a negative month for the Canadian dollar, which is down more than 2 1/2 cents US from the end of 2013, falling near levels that haven't been experienced since September 2009.
The loonie has been buffeted by a variety of factors, including the central bank's dovish tone on interest rates and disappointing trade and employment data.
But it has also been under pressure from an American currency which has risen as the U.S. Federal Reserve starts to cut back on its key stimulus measure, the massive monthly bond purchases that have kept long-term rates low.
Meanwhile, oil and copper prices faltered Monday following the release of data showing a slowdown in the Chinese economy.
The world’s second-largest economy's annualized growth rate was 7.7 per cent in the fourth quarter, down from the previous quarter’s 7.8 per cent.
Growth for the full year was 7.7 per cent, tying 2012 for the weakest annual performance since 1999.
Factory output, exports and investment all weakened. On a quarter-to-quarter basis, economic growth dropped to 1.8 per cent from the previous period’s 2.2 per cent.
The February crude contract declined 65 cents to US$93.72 a barrel in late afternoon electronic trading on the New York Mercantile Exchange.
March copper was unchanged at US$3.34 a pound while February bullion rose $2.20 to US$1,254.10 an ounce.