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Loonie touches its strongest since Nov. 16 at 1.3275
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Canada factory PMI shows activity growing in January
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Price of U.S. oil settles 3.1% lower
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Canada-U.S. 10-year spread narrows by 6.2 basis points
(Adds economist quote and details on activity; updates prices)
By Fergal Smith
TORONTO, Feb 1 (Reuters) - The Canadian dollar
strengthened to its highest level in 2-1/2 months against its
U.S. counterpart on Wednesday, as domestic data showed growth in
the factory sector and the U.S. Federal Reserve raised interest
rates as expected.
Wall Street shares rallied and the U.S. dollar fell
against a basket of major currencies as the Fed hiked by a
quarter of a percentage point and promised "ongoing increases,"
but acknowledged that inflation pressures are easing.
"The FOMC (Federal Open Market Committee) will be less
willing to deliver as much economic pain as it might previously
have thought would be necessary should inflation run at the more
moderate pace we've been seeing in the last 3-6 months," Avery
Shenfeld, chief economist at CIBC Capital Markets, said in a
note.
The S&P Global Canada Manufacturing Purchasing Managers'
Index (PMI) rose to a seasonally adjusted 51.0 in January from
49.2 in December as an uptick in domestic demand led to firms
increasing production. It was the first month since July that
the index was above the 50 threshold that marks expansion in the
sector.
The Canadian dollar strengthened to 0.1% to 1.3290
per greenback, or 75.24 U.S. cents, after touching its strongest
since Nov. 16 at 1.3275.
The gain for the loonie came even as the price of oil, one
of Canada's major exports, settled 3.1% lower at $74.41 a
barrel, pressured by U.S. government data showing big increases
in inventory.
Canadian government bond yields were lower across the curve,
tracking the move in U.S. Treasuries.
The 10-year eased 6.1 basis points at 2.857%,
while the gap between it and the equivalent U.S. rate narrowed
by 6.2 basis points to about 55 basis points in favor of the
U.S. bond.
(Reporting by Fergal Smith; editing by Jonathan Oatis and Will
Dunham)
