Canadian dollar coins, or Loonies, are displayed on a map of North America.Paul Chiasson/The Canadian Press
The Canadian dollar jumped more than half a cent Friday amid questions about the pace of future interest rate hikes.
The loonie gained 0.53 of a cent to end at 88.98 cents (U.S.) after Statistics Canada said inflation rose by 0.1 per cent from September. Economists had been looking for a drop after a 0.2 per cent rise in September.
On an annualized basis, the consumer price index climbed 2.4 per cent from a year ago. Economists had expected a gain of 2.1 per cent, according to Thomson Reuters.
Rising inflation could prompt the Bank of Canada to move earlier on raising interest rates. However, economists generally don't expect the bank to boost rates until well into the second half of next year, after the U.S. Federal Reserve moves to increase rates south of the border.
The loonie and commodities climbed after signs China and Europe are prepared to step in to sustain the fragile global economic recovery.
China's central bank cut interest rates Friday and promised to inject extra credit into the financial system if needed, while the head of the European Central Bank said the ECB was willing to "step up the pressure" and broaden its efforts to stimulate the struggling economy.
China's central bank cut the interest rate on its one-year loans to financial institutions by 0.4 of a percentage point to 5.6 per cent. The country's annual rate of economic growth slowed to a five-year low of 7.3 per cent last quarter. The move by the central bank came a day after the release of data showing that Chinese manufacturing activity fell to a six-month low in November.
Many analysts think a key motivation behind China's rate cut has been the recent sharp fall in the value of the Japanese yen, which is likely to affect China's exports.
And ECB president Mario Draghi said that if current efforts do not achieve the desired effect, the bank could "broaden even more the channels through which we intervene." For many in the markets, that was a clear hint that the bank could soon starting buying government bonds.
While China's growth has been slowing, conditions in the euro zone are much worse, with the region teetering on the edge of recession. Financial information company Markit said its purchasing managers' index for the euro zone, a broad gauge of business activity, fell to a 16-month low in November.
Commodity prices advanced in the wake of the moves by the central banks, with the January crude oil contract in New York ahead 66 cents to $76.51 a barrel.
Oil prices have been below $80 a barrel this month, falling to four-year lows of around $75 over the past week amid rising supplies and weakening demand.
The OPEC cartel meets next week to discuss global production levels.
The December copper contract gained 1 cent to $3.03 a pound while the December gold bullion contract advanced $6.80 to $1,197.70 an ounce.