Canadian dollar weakens into month-end after posting earlier five-month high
By Fergal Smith
TORONTO (Reuters) - The Canadian dollar weakened slightly against its U.S. counterpart on Thursday, turning lower on month-end transactions after strong domestic data helped drive the currency to a five-month high earlier.
Month-end buying of U.S. dollars was accompanied by unwillingness to be short the greenback ahead of Friday's U.S. employment report, according to analysts.
"I think this is nothing more than a month-end, quarter-end short-squeeze with a little U.S. dollar demand," said Patric Booth, head of derivatives trading at Velocity Trade.
Still, the Canadian dollar ended the first quarter 6.5 percent higher than at the end of 2015. It has rallied more than 13 percent since hitting a 12-year low in January at C$1.4689, helped by recovery in crude oil prices, stabilization in financial markets and reduced expectations for Bank of Canada rate cuts.
It approached key resistance between C$1.2800 and C$1.2830, according to Bipan Rai, executive director, macro strategy at CIBC Capital Markets.
"The inability to close below there for today implies further consolidation to come," he added, suggesting there may be a cap on the upside for the currency.
Canada's economy grew by a much larger-than-expected 0.6 percent in January. It was the fourth straight monthly gain and the biggest since July 2013.
That puts the economy on track to grow much faster than the Bank of Canada's 1 percent estimate for the first quarter, according to Paul Ferley, assistant chief economist at Royal Bank of Canada. Continued...