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Canadian dollar rises amid rate cuts by central banks, positive employment data

TORONTO - The Canadian dollar advanced Thursday morning with investor sentiment buoyed by moves by three major central banks to stimulate their economies and positive American jobs data.

Higher oil prices also helped push the commodity-sensitive loonie up 0.17 of a cent to 98.87 cents US.

The Chinese central bank cut its benchmark lending rate by 0.31 of a point to six per cent. It is the second time within a month the bank has cut interest rates in an attempt to stimulate the rapidly slowing economy.

The European Central Bank weighed in with a quarter point cut in its key rate to an all time low of 0.75 per cent.

The ECB also cut its overnight deposit rate — what it charges banks for depositing their money with the ECB overnight — to zero. That is meant to encourage banks to invest their money in the economy rather than stash it with the ECB.

The Bank of England announced earlier it is injecting another 50 billion pounds into the ailing British economy, which has been officially in recession. The move by the Bank of England's Monetary Policy Committee involves the central bank purchasing government bonds from banks. It was widely-anticipated and raises the amount it is pumping into the British economy since March 2009 to 375 billion pounds. It is the first stimulus since February.

Meanwhile, payroll firm ADP reported that the U.S. private sector created 176,000 jobs during June. This news was particularly welcome, coming a day before the release of the U.S. non-farm payrolls report. Expectations are modest with economists forecasting the economy only cranked out about 90,000 jobs during June.

Also, outplacement firm Challenger Gray & Christmas said the June total is 9.4 per cent lower than the number of cuts a year ago and is the lowest monthly total since May 2011.

And the U.S. Labour Department reported an improvement in claims for jobless insurance. They fell 14,000 last week to 374,000.

Traders also looked ahead to the release of Canadian jobs data Friday. It is expected the economy created about 16,000 jobs last month.

Oil prices advanced following the announcement of the rate cuts with the August crude contract on the New York Mercantile Exchange ahead 65 cents to US$88.31 a barrel. Oil is up about US$10 from last Thursday, partly over increased tensions with Iran. But traders have also been hopeful that central bank action to boost economic growth, along with signs late last week that Eurozone leaders are making progress in dealing with the region's debt crisis, will boost demand.

Leaders of the 17 euro countries agreed to allow Europe’s bailout fund to capitalize banks directly and to buy bonds of imperiled countries.

September copper eased two cents to US$3.52 but prices are still up about six per cent from last Thursday.

Bullion prices relaxed $9.90 to US$1,613.70 an ounce.

News from © The Canadian Press, 2012
The Canadian Press

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