Dollar slips below 77 cents US, but stocks make quarterly gains
Stocks are set to close out March with gains as oil, loonie roar back
The Canadian dollar slumped late Thursday, closing below 77 cents after trading as high as 77.76 cents US on data showing strong GDP growth in January.
The loonie closed down .18 of a cent at 76.94 cents US, wiping out early gains after oil slid in the afternoon.
- Canada's GDP beats expectations, grows 0.6% in January, best month since 2013
- Oil optimism yes, but it's too early to bet the farm on a full-fledged recovery
The Canadian currency started March at 74.55 cents US after hitting a low below 69 cents US in January.
Its rise throughout the month is in part a story about a weakening greenback, with the U.S. dollar falling against most currencies after Fed Chair Janet Yellen signalled the American central bank will move cautiously on raising rates.
A high U.S. dollar has been hurting American exports and is eating into the profits of major corporations. Many believe it is overvalued.
Is U.S. dollar overvalued?
"The [U.S] dollar is overvalued, particularly against the major currencies, euro and yen," Steven Saywell, BNP Paribas SA's global head of foreign-exchange strategy in London, told Bloomberg.
Canada's GDP expanded by a better than expected 0.6 per cent in January, the best month since 2013 and an indication that a low loonie is helping to revive Canadian manufacturing.
"Strong Canadian data, in tandem with broad-based U.S. dollar weakness as market participants continue to reassess the Fed's rate hike timeline, have been the main drivers of this Canadian dollar rally," according to Rahim Madhavji, a currency trader with Knightsbridge FX in Toronto.
BMO economist Doug Porter says the loonie is "reasonably valued" at its current level, though he said it might be overvalued if commodity prices slide again.
West Texas Intermediate, the benchmark North American crude oil contract,dropped 17 cents to $38.15 US a barrel at the close.
Stocks have an upbeat March
North American stock markets lost ground at the end of the day, but finished out the quarter in positive territory.
The TSX was down nine points to 13,494. Since the beginning of the month, it has rebounded by 5.2 per cent, or 674 points. Since the beginning of the year, it's up 3.7 per cent.
The Dow Jones industrial average fell 31 points to 17,685. That's a gain of more than 1,100 points, or seven per cent, from where it stood at the end of February. It's up 1.5 per cent on the year, while the broader S&P index, is up less than one per cent on the year.