C$ range-bound in quiet holiday trading; BoC in focus

Mon May 27, 2013 9:26am EDT
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar held steady on Monday with investors turning their attention to the Bank of Canada on Wednesday after a mostly volatile previous week following debate over when the Federal Reserve will pull back its stimulus measures.

Trading was particularly quiet with the United States and Britain both closed for public holidays.

The Canadian dollar was trading at C$1.0325 versus the U.S. dollar, or 96.85 U.S. cents at 8:54 a.m. (1254 GMT), range-bound from Friday's finish at C$1.0321, or 96.89 U.S. cents.

Canada's dollar, which was mostly underperforming other major currencies, was trading tightly between C$1.0301 and C$1.0331 on Monday.

With little news to drive the currency, attention is focused on the Bank of Canada, which will announce its next scheduled interest rate decision on Wednesday. The central bank is unanimously expected to keep its benchmark rate unchanged at 1 percent, according to a Reuters poll of 34 global economists.

"They will still continue to maintain their tightening bias, because I think this at this stage Canada's (economy) weakening off on its own. I don't think losing the bias to tighten is something they'd be wanting to do at this stage," said Don Mikolich, executive director, foreign exchange sales at CIBC World Markets.

"The debate now is almost, is Canada or the U.S. going to hike first, when it's always been assumed it'd be here."

Forecasters are expecting the bank to next hike interest rates in the final quarter of 2014, which is not far off from the Fed's expectations it will begin hiking around 2015.   Continued...