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Loonie up amid disappointing GDP read, greenback lower ahead of Fed announcement

TORONTO – The Canadian dollar shook off early losses late Wednesday morning despite data showing the economy performed weaker than expected during May.

The loonie was up 0.17 of a cent to 97.24 cents US as the American currency weakened ahead of the end of a two-day meeting of the U.S. Federal Reserve on interest rates.

There has been much speculation surrounding the Fed over the last two months, since chairman Ben Bernanke first mentioned that the central bank could start to taper its US$85 billion of monthly bond purchases later this year if economic conditions warrant. This key piece of economic stimulus is credited with keeping long term rates low and fuelling a strong rally on markets.

Statistics Canada reported that gross domestic product grew by 0.2 per cent. Economists had looked for a 0.3 per cent rise from April.

The growth picture was better in the U.S., where GDP grew at an annualized rate of 1.7 per cent during the second quarter, higher than the one per cent advance that was expected.

There was also some positive news two days before the release of the U.S. government’s release of employment data.

Payroll firm ADP reported that private sector employment increased by a better than expected 200,000 during this month. Economists expect the economy cranked out about 190,000 jobs during July.

Commodity prices were mainly higher as the September crude contract in New York moved up 79 cents to US$103.87 a barrel even as U.S. inventories increased by 400,000 barrels last week. Analysts had looked for a three-million-barrel decline.

But inventories have declined 30 million barrels over the past month.

September copper rose four cents to US$3.08 after falling seven cents Tuesday. December bullion shed early gains following the release of the positive jobs and economic growth data, falling $17.20 to US$1,307.60 an ounce.