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Canadian Dollar Holds 0.92 amid Weak Manufacturing Data

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Canadian Dollar Holds 0.92 amid Weak Manufacturing Data

The Canadian dollar weakened slightly against its US counterpart, but remained supported above the 0.92 US handle as geopolitical tensions outweighed disappointing Canadian manufacturing shipments data.

The loonie declined 0.06 percent to 0.9207, after hitting an intraday high of 0.9220. The loonie is on pace for a weekly gain of 0.7 percent.

In economic data, Canadian manufacturing shipments unexpectedly declined in April, Statistics Canada reported today in Ottawa. Manufacturing sales declined 0.1 percent in April to $50.9 billion, the first decline in four months. Economists forecast a monthly gain of 0.4 percent.

Petroleum and coal products, aerospace products and parts and machinery industries suffered the biggest declines, although losses in those industries were largely offset by gains in other industries.

Fourteen of the 21 manufacturing industries posted gains in April, despite the decrease in total sales, StatsCan said. These 14 industries account for approximately 60 percent of the posted gains.

Constant dollar sales were up 0.4 percent, a sign total sales volumes increased in April.

Geopolitical unrest in the Middle East has elevated the price of oil this week, keeping the Canadian dollar buoyed against its US counterpart. Earlier this week an al-Qaida-affiliated group captured two key cities in Iraq and vowed to expand their operations in Baghdad.

US President Barrack Obama stated Washington is considering “all options” to help Iraq withstand the forces of the Islamic State in Iraq and the Levant, which captured the cities of Fallujah and Mosul.

ISIL is also fighting in neighbouring Syria against the government of President Bashar al-Assad.

Crude prices advanced further Friday. Brent for July delivery rose 10 cents to $113.12 a barrel. West Texas Intermediate, the US benchmark, advanced 19 cents to $106.72 a barrel.

In US data, producer prices advanced 2 percent annually in May, following a gain of 2.1 percent the prior month, the Labor Department reported today in Washington. The figure disappointed the markets, which expected a gain of 2.4 percent.

The Canadian dollar’s weekly advance comes amid heightened expectations about its eventual demise. A recent study published by the Royal Bank of Canada – one of the country’s largest financial institution by market capitalization – forecast the loonie to fall to 85 US cents by the end of the year, which will help lift Canadian exports.

The report did have a silver lining, however. RBC economists said Canada’s economy will advance 2.4 percent this year and 2.7 percent next year, driven by greater demand for Canadian exports and an improving labour force. Wage growth is also expected to accelerate, helping core inflation reach the Bank of Canada’s 2 percent target by the second half of 2015.

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