Bloomberg News

Canadian Dollar Gains as Consumer Prices Rise More Than Forecast

February 17, 2012

Feb. 17 (Bloomberg) -- The Canadian dollar rose versus its U.S. counterpart as a government report showed the inflation rate increased last month more than forecast, supporting the case for higher interest rates.

The Canadian currency was headed for a rally this week as investor appetite for risk increased on speculation Greece, where Europe’s sovereign-debt crisis began more than two years ago, will win a second international rescue to avert a default.

The loonie, as the currency is also known for the image of the aquatic bird on the C$1 coin, appreciated 0.1 percent to 99.56 cents per U.S. dollar at 7:02 a.m. Toronto time.

The consumer price index rose 2.5 percent in January from a year earlier after December’s 2.3 percent gain, Ottawa-based Statistics Canada said. Economists surveyed by Bloomberg News predicted the rate to stay at the previous level, according to the median of 24 estimates.

The Bank of Canada has held its overnight rate at 1 percent since September 2010, the longest stretch since it began targeting that interest rate in 1994.

Growth in Canada and the U.S. will be “more modest” than previously forecast as Europe struggles to contain its debt crisis, the Ottawa-based bank said Jan. 17 in a statement after its last rate meeting.

The bank said Canada’s economy will return to full output and the pace of price increases will accelerate back to its 2 percent target in the third quarter of 2013, one quarter earlier than it had forecast.

--Editors: Greg Storey, Dennis Fitzgerald

To contact the reporter on this story: Austen Sherman in New York at asherman18@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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