Loonie rises on Chinese manufacturing data; traders hope for fiscal cliff deal

TORONTO – The Canadian dollar was flat late Monday morning even as a strong Chinese economic report lifted commodity prices in a subdued market just hours ahead of the New Year holiday.

The commodity-sensitive currency rose 0.01 of a cent to 100.36 cents US.

Copper prices rose as the HSBC China manufacturing Purchasing Managers’ Index rose to a final reading of 51.5, the best reading for the data since May, 2011. The reading was an upward revision from the preliminary 50.9 result and an improvement from November’s PMI of 50.5.

The March contract was up three cents to US$3.62 a pound. China is the world’s biggest consumer of copper, which is viewed as an economic barometer as it is used in so many applications.

Oil prices also gained ground with the February contract on the New York Mercantile Exchange up 47 cents to US$91.27 a barrel.

Bullion prices also improved with the March contract ahead $6.60 to US$1,662.50 an ounce.

Meanwhile, traders hoped for an agreement that would head off automatic tax hikes and spending cuts clicking in at the start of the new year that could push the U.S. back into recession — the so-called “fiscal cliff” scenario.

Investors remain confident that some sort of deal will be reached between Republicans and Democrats, if not Monday then in the coming days or weeks. As a result, they think that the potential damage caused by higher taxes and spending cuts will be limited.