C$ nudges lower ahead of central banks, jobs data

Tue Sep 4, 2012 4:45pm EDT
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar edged slightly lower against its U.S. counterpart on Tuesday as U.S. manufacturing data showed the economy of Canada's largest trading partner continues to struggle, disappointing investors ahead of several events later in the week that have the potential to move the market.

The U.S. data, which also weighed on North American stock markets, overshadowed Tuesday's election in the province of Quebec in which the separatist Parti Quebecois is expected to return to power.

The figures showed U.S. manufacturing shrank at its sharpest clip in more than three years last month, while separate data showed exports and hiring in the sector slumped.

"The data was soft. But the data pales in comparison with the rest of the week's events in (terms of) data risk," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

On Wednesday, the Bank of Canada will announce its next interest rate decision, while Canada and the United States will release employment data for August on Friday.

The central bank is expected to leave interest rates unchanged, so investors are focused on whether Governor Mark Carney will change the bank's recent message that interest rates need to rise.

"I think (Carney's) going to be cognizant of the strength in Canadian dollar as being an economic headwind and ultimately his guidance, while hawkish, will likely acknowledge the strength of the Canadian dollar and that itself may mitigate some of the gains by loonie going forward," Spitz said.