TORonTO The Canadian dollar was higher Wednesday as risk appetite improved amid a pleasant surprise from the latest Chinese trade data.
The currency rose 0.08 of a cent to 98.48 cents US.
Customs data showed that China posted an unexpected trade deficit of US$800 million in March as imports rose 14.1 per cent after having grown five per cent in the combined January-February period.
The report suggested Chinese manufacturers and consumers might be buying more, raising hopes for stronger performance from the worlds second-biggest economy.
Traders had expected China to post a $15.3-billion surplus last month.
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The trade data followed the release of another report Tuesday that showed Chinas consumer prices rose at a 2.1 per cent rate in March. That was down from the previous months 3.2 per cent and well below the official target of 3.5 per cent for the year.
The showing gives China some leeway in being able to take further measures to stimulate growth, which came in at 7.9 per cent in the three months ended in December, up from the previous quarters 7.4 per cent.
Meanwhile, analysts pointed out that there was some weakness in the trade data released Tuesday.
Peter Buchanan, senior economist at CIBC World Markets, said imports of a number of key resources were not showing much improvement.
Crude oil imports actually fell by about two per cent on the year, imports of copper, while rebounding from Februarys holiday depressed levels, eased by 31 per cent from the matching 2012 period, suggesting continuing destocking pressures, he said.
The continuing softness is a number of key areas . . . is further evidence that China will not provide the sort of lift to commodity markets this time around as in the wake of the last recession four years ago.
Commodity prices were lower following initial strong gains in the wake of the Chinese inflation data.
The June crude contract on the New York Mercantile Exchange declined 44 cents to US$93.76 a barrel.
May copper dipped two cents to US$3.42 a pound while June gold bullion in New York fell $7.80 to US$1,578.90 an ounce.
Meanwhile, ratings agency Fitch cut its rating on Chinas long-term local currency sovereign debt on Tuesday, citing potential risks from rapid growth in credit and local government debt loads. The rating was cut from AA minus to a still healthy A plus.
The change is unlikely to cause trouble for the government because it has relatively low debt levels compared with other major economies. Fitch left its rating on Chinas foreign currency government debt unchanged.
Traders also looked to the afternoon release of minutes from the latest U.S. Federal Reserve monetary policy meeting to see if there has been a marked change in tone among Fed officials. Specifically, they will seek clues as to whether the central banks monetary stimulus may end sooner than previously thought.
A weak employment report released last Friday raised expectations that aggressive monetary policies being used to push the recovery forward will continue.
