Canadian dollar weaker after yen intervention, GDP supports

Mon Oct 31, 2011 9:35am EDT
 
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By Andrea Hopkins

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday, briefly sinking below parity, after Japan intervened to weaken the yen, sending the U.S. dollar higher against a range of currencies.

World equities dropped and commodity prices were also hit by the stronger dollar, which jumped after the Japanese intervention, while returning doubts over the EU's plan to solve the debt crisis added to the cautious tone.

The U.S. dollar rose more than 4 percent against the yen, pushing the Canadian dollar to the session low below the one-for-one level with its U.S. counterpart. But the Canadian currency regained some ground as the U.S. dollar struggled to hold gains.

"We've got risk on the defensive as we go into the close of the month, and that dollar move did see us attempt back over parity, but clearly didn't have momentum as the U.S. dollar has struggled a little," said Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London.

At 9:14 a.m. (1314 GMT), the Canadian dollar stood at C$0.9950 against the U.S. dollar, or $1.0050, down from Friday's North American session close at C$0.9919 versus the greenback, or $1.0082.

Stronger-than-expected Canadian growth data boosted the Canadian dollar briefly.

Gross domestic product climbed 0.3 percent from the previous month as oil and gas extraction surged, beating market expectations of 0.2 percent growth. Year-on-year growth was 2.4 percent.

Stretch said the currency could trade in a tight range as month-end portfolio rebalancing implied U.S. dollar selling, but risk aversion would likely come back into play late in the session, boosting the safe-haven greenback.   Continued...