Canadian dollar shoots higher on back of Keystone pipeline optimism
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TORONTO — The Canadian dollar charged ahead Monday amid optimism that the controversial Keystone XL pipeline will get U.S. approval.The loonie rose 0.58 of a cent to 90.36 cents US since the pipeline would boost shipments from the oil sands and give a lift to the Canadian economy.The U.S. State Department said Friday that the proposed TransCanada pipeline would produce less greenhouse gas emissions compared with transporting oil to the Gulf of Mexico by rail.It also said the industry is driven by too many factors to pin everything on a single pipeline — an apparent rejection of the argument by environmental groups that stopping Keystone XL would thwart the oil sands.“This is likely to sway Secretary of State Kerry to provide a favourable recommendation to President Obama on the construction of the pipeline, which will provide added capacity for Canadian oil to flow into the U.S.,” observed Camilla Sutton, chief FX strategist for Scotiabank.There was also a positive outlook on the Canadian economy from the International Monetary Fund.The IMF expects the Canadian economy will grow 2.2% this year, which is up from an estimated 1.7% in 2013.Meanwhile, emerging market worries also weighed on financial markets as data showing a slowdown in Chinese manufacturing added to concerns about countries such as Turkey, South Africa and India, all of which had to hike rates last week to support their currencies.These countries and others have been hit by an outflow of investor funds as the U.S. Federal Reserve cuts back on its massive monthly bond purchases, a move that kept long-term rates low and resulted in a flow of cheap money into those markets.But the primary worry is that weaker growth in those countries could drag down developed markets.China’s official purchasing managers’ index showed the manufacturing sector continuing to expand during January but at a slower pace, coming in at 51.5, down from 52.5 in December. Any reading above 50 signals expansion.Other data showed a larger than expected dip in the pace of growth in the American manufacturing sector. The Institute for Supply Management said its January manufacturing index dropped to 51.3 during January, down from 56.5 in December.In Canada, Royal Bank’s purchasing managers index also pointed to a weak start to 2014 for the Canadian manufacturing sector. The January index came in at 51.7, down from 53.5 in December.Traders also looked to the release Friday of the December employment report for Canada.Statistics Canada was expected to report the economy created about 15,000 jobs after 44,000 positions were erased in December.Commodity prices were unaffected by the Chinese data as HSBC’s manufacturing report from last week had already braced investors for another indication of a slowdown in the world’s second-biggest economy.March crude in New York dipped dropped 91 cents to US$96.58.March copper was down a cent to US$3.19 after falling about 2.25% last week while risk averse investors pushed April gold up $24 to US$1,263.80 an ounce.