Canada dollar weakens as North American factory data drags

Mon Dec 3, 2012 4:55pm EST
 
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar softened against the U.S. currency on Monday after U.S. data showed the country's manufacturing sector shrank unexpectedly in November, though signs of economic growth in China tempered losses.

The Institute for Supply Management (ISM) said its index of national factory activity in the United States fell to 49.5 in November from 51.7 the month before, its lowest level in more than three years and below expectations.

"Equities turned after the ISM data came out this morning," said David Bradley, director of foreign exchange trading at Scotiabank, but added the moves were very limited.

"There's just a lot of market positioning going on ahead of some of the central bank announcements later this week, some more data coming out this week."

Meanwhile, Canadian manufacturing growth slowed for a fifth straight month in November and hit a more than two-year low, according to the RBC Canadian Manufacturing Purchasing Managers Index. This signaled the third-quarter's disappointing economic performance may persist for the rest of the year.

"The data's been softer for Canada and softer for the U.S. as well. The general risk-on tone that we started the day with has been eaten away at a little," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada.

"Most of the indicators that we've seen coming out for Canada have been soft, and I think that's putting the Canadian dollar a little bit on a back foot - meaning there's a chance of it getting weaker."

The Canadian dollar finished the session at C$0.9949 versus the U.S. dollar, or $1.0051, compared with Friday's North American session close of C$0.9936, or $1.0064.   Continued...

 
A man holds the new Canadian 100 dollar bill made of polymer in Toronto November 14, 2011. REUTERS/Mark Blinch