Canada dollar at 5-week low as U.S. budget talks struggle

Fri Dec 28, 2012 4:35pm EST
 
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By Andrea Hopkins

TORONTO (Reuters) - The Canadian dollar ended slightly weaker against its U.S. counterpart on Friday as the White House and U.S. lawmakers made a late attempt to avert the "fiscal cliff" and investors choose safe-havens to wait out the negotiations.

World stocks slipped and the U.S. dollar gained as the deadline looms for reaching a budget deal to avert massive tax increases and spending cuts that could drag the U.S. economy, the destination for most Canadian exports, into recession. <MKTS/GLOB>

President Barack Obama was not planning to make a new offer to avert the tax hikes and spending cuts that loom on January 1 at a White House meeting with congressional leaders on Friday, a source familiar with the meeting said.

At the meeting, Obama was set to ask lawmakers to hold a vote on a plan that would allow taxes to rise on those who earn $250,000 and up, and that would extend unemployment insurance benefits, according to the source.

"We saw some hint of progress on the fiscal cliff negotiations, a mini deal, and for everyone that is a disappointment," said Adam Button, currency analyst at ForexLive in Montreal.

Commodity-linked currencies like the Canadian dollar tend to benefit when U.S. budget negotiations run smoothly, but when there are snags, investor flows go into the highly liquid U.S. dollar.

The Canadian dollar ended the North American session at C$0.9965 versus the U.S. dollar, or $1.0035, weaker than Thursday's North American session close at C$0.9949 versus the U.S. dollar, or $1.0051.

Earlier in the session the Canadian currency hit C$0.9969, its weakest level since November 23, but seemed bound by a tight range approaching parity with the U.S. dollar.   Continued...