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

TORONTO – The Canadian dollar closed higher Monday as a strong economic report from China lifted commodity prices in a subdued market just hours ahead of the New Year’s holiday.

The commodity-sensitive currency rose 0.16 of a cent to 100.51 cents US.

Copper prices advanced as the HSBC China manufacturing Purchasing Managers’ Index rose to a final reading of 51.5, the best reading 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 copper contract was up six cents to US$3.65 a pound. China is the world’s biggest consumer of the metal, 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 $1.02 at US$91.82 a barrel.

Gold bullion prices also improved, with the March contract ahead $19.90 to US$1,675.80 an ounce.

Meanwhile, U.S. President Barack Obama offered fresh hope that some kind of a deal is in the works to blunt the worst of automatic tax hikes set to take effect Jan. 1.

Big, across-the-board spending cuts were also set to take effect Tuesday, part of a scenario known as going over the “fiscal cliff.”

Economists fear the double-barreled hit could push the U.S. back into recession if they are allowed to stand.

Obama told a news conference that such a proposed deal would extend tax credits for families with children and for clean energy companies and also extend unemployment insurance to two million Americans.

He said he would have preferred “a more comprehensive deal that solved our budget problems in a balanced and a responsible way….but that is a bit too much to hope for now.”

And he cautioned that while negotiators for the Democrats and Republicans are close to a deal, “they’re not there yet.”