January 9, 2013 / 10:04 PM / in 5 years

Canadian dollar overlooks U.S. results in rangebound trade

TORONTO (Reuters) - Canada’s dollar ended slightly lower against its U.S. counterpart on Wednesday, shrugging off a modest rally in other riskier assets after Alcoa (AA.N) opened the U.S. earnings season with an optimistic outlook.

Global equities staged a modest recovery after two days of losses. Even with the encouraging Alcoa report, investors lacked a clear view of how U.S. corporations fared in the fourth-quarter and the Canadian currency was rangebound.

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Adam Cole, global head of FX strategy at RBC Capital Markets in London, expected more reaction to U.S. earnings once they picked up steam.

“If that’s where stocks take their direction then it’s difficult to get away from that, being a fairly major barometer of pressure on CAD,” he said.

There was caution a day ahead of European and British central bank policy meetings, as well as a Spanish auction that will test appetite for peripheral euro zone debt, and Chinese trade data.

On the home front, the next major event of interest is a speech on Thursday by Tiff Macklem, a senior Bank of Canada official widely tipped to replace the departing Governor Mark Carney.

“Investors are looking toward Tiff Macklem’s speech to see if there are any hints of his policy takes, if they’re any different from Carney‘s, which is highly unlikely I think,” said John Curran, senior vice president at CanadianForex.

“If anything, the Canadian dollar is remaining in positive territory recently speaking due to last week’s (jobs) numbers and expectations that frontrunner Macklem is going to be towing the line so to speak with previous BoC sentiment.”

The Bank of Canada stands apart from other major central banks in that it avoided large bouts of quantitative easing and now insists the next move in interest rates is likely to be up.

The Canadian dollar ended the North American session at C$0.9877 versus the greenback, or $1.0125, slightly weaker than Tuesday’s close at C$0.9867, or $1.0135. It traded in a tight 26-point range between C$0.9855-C$0.9881.

U.S. profits were expected to beat the previous quarter’s lackluster results, but analyst estimates were down sharply from October. Quarterly earnings were expected to grow by 2.7 percent, according to Thomson Reuters data.

RBC noted near-term U.S. dollar resistance versus the Canadian dollar around C$0.9947 and support near C$0.9826.

Analysts noted that the looming U.S. debt ceiling talks also kept investors on the sidelines.

Still, the Canadian dollar was outperforming some other major currencies such as the yen, as renewed expectations of easier Bank of Japan monetary policy led some investors to sell the Japanese currency.

Canadian bond prices were also little changed across the curve. The two-year bond was off nearly 1 Canadian cent to yield 1.168 percent, while the benchmark 10-year bond was down 2 Canadian cents to yield 1.910 percent.

Reporting by Claire Sibonney; editing by Andrew Hay

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