Keystone XL pipeline optimism helps lift Canadian dollar

The Canadian dollar got a bit of a boost Monday amid optimism that the controversial Keystone XL pipeline will get U.S. approval.

National activists promise civil disobedience if project is approved

The Canadian dollar was higher Monday morning amid a U.S. dollar that weakened across the board and optimism that the controversial Keystone XL pipeline will get U.S. approval. (Eric Hylden/Associated Press)

The Canadian dollar got a bit of a boost Monday amid optimism that the controversial Keystone XL pipeline will get U.S. approval.

The loonie rose 0.58 of a cent to 90.36 cents US early Monday before settling at 90.11 cents US by the end of the trading day, an increase of 0.33 of a cent over the previous close.

The uptick came just days after the pipeline, which would boost shipments from the oilsands and give a lift to the Canadian economy, got a vote of confidence from the U.S. State Department.

The State Department said Friday the proposed TransCanada pipeline would produce less greenhouse gas emissions compared with transporting oil to the Gulf of Mexico by rail.

It also said the industry is driven by too many factors to pin everything on a single pipeline — an apparent rejection of the argument by environmental groups that stopping Keystone XL would thwart the oilsands.

"This is likely to sway Secretary of State (John) Kerry to provide a favourable recommendation to President Obama on the construction of the pipeline, which will provide added capacity for Canadian oil to flow into the U.S.," observed Camilla Sutton, chief FX strategist for Scotiabank.

Lawsuit moves forward

With yet another obstacle removed for the Keystone XL pipeline, opponents were pressing forward with a lawsuit to challenge the project, public protests and an effort to inject the issue into the November elections.

Supporters and opponents both were quick to claim victories after the State Department report, which raised no major objections to the pipeline, was released.

The oil industry, some union groups and congressional Republicans called on the Obama administration to move forward with the project, while a coalition of landowners and environmentalists say there is still cause for denying a federal permit.

The project would ship 830,000 barrels of oil a day from Canada to Texas Gulf Coast refineries.

Meanwhile, farmers and ranchers in Nebraska who oppose the pipeline are planning to run for seats on a state board that regulates power stations that are needed along the project route.

Civil disobedience plans

National activists say they have recruited more than 75,000 volunteers willing to participate in civil disobedience, should President Barack Obama approve the Keystone project.

The project now goes to a 30-day comment period and a review by U.S. Secretary of State Kerry and other agencies.

Obama has 90 days to make the decision on the pipeline, but the White House on Friday disputed the notion that the report is headed to a fast approval. Oil began flowing last week through an Oklahoma-to-Texas section already approved by Obama.

"There's no question, if the president approves this permit, that there will be civil disobedience," said Jane Kleeb, executive director of the group Bold Nebraska, which has helped organize opposition in the state.

"We've said from the beginning that we will support the landowners and what they want to do and what they think is best for their property. I think you'll see some landowners driving really slow on their county roads to block the (pipeline) trucks."

Outlook for Canada's economy also positive

In addition to a stronger dollar, there was also a positive outlook on the Canadian economy from the International Monetary Fund.

The IMF expects the Canadian economy will grow 2.2 per cent this year, which is up from an estimated 1.7 per cent in 2013.

Meanwhile, emerging market worries also weighed on financial markets as data showing a slowdown in Chinese manufacturing added to concerns about countries such as Turkey, South Africa and India, all of which had to hike rates last week to support their currencies.

These countries and others have been hit by an outflow of investor funds as the U.S. Federal Reserve cuts back on its massive monthly bond purchases, a move that kept long-term rates low and resulted in a flow of cheap money into those markets.

But the primary worry is that weaker growth in those countries could drag down developed markets.

Employment numbers expected

China's official purchasing managers' index showed the manufacturing sector continuing to expand during January but at a slower pace, coming in at 51.5, down from 52.5 in December. Any reading above 50 signals expansion.

Other data showed a larger than expected dip in the pace of growth in the American manufacturing sector. The Institute for Supply Management said its January manufacturing index dropped to 51.3 during January, down from 56.5 in December.

In Canada, Royal Bank's purchasing managers index also pointed to a weak start to 2014 for the Canadian manufacturing sector. The January index came in at 51.7, down from 53.5 in December.

Traders also looked to the release Friday of the December employment report for Canada.

Statistics Canada was expected to report the economy created about 15,000 jobs after 44,000 positions were erased in December.

Commodity prices were unaffected by the Chinese data as HSBC's manufacturing report from last week had already braced investors for another indication of a slowdown in the world's second-biggest economy.

Benchmark West Texas Intermediate crude for March delivery dropped $1.06 to close at $96.43 US a barrel on the New York Mercantile Exchange. Copper for March delivery fell 1.4 cents, or 0.4 per cent, to $3.18 per pound, after falling about 2.25 per cent last week while risk averse investors pushed gold for delivery in April up $20.10, or 1.6 per cent, to $1,259.90 an ounce.

With files from Associated Press