Canadian dollar ends lower but avoids big stock-market fall

Mon Oct 31, 2011 4:44pm EDT
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By Andrea Hopkins

TORONTO (Reuters) - The Canadian dollar ended weaker against its U.S. counterpart on Monday after Japanese intervention in the foreign-exchange market boosted the U.S. dollar, but the currency avoided the bigger selloff that hit global stock markets.

Global equities and commodities fell on renewed worries about the effectiveness of last week's euro zone plan to stem its debt crisis, and the greenback rose following Japan's intervention to weaken the yen. Low-risk government bonds also rose.

But while the Canadian dollar weakened slightly, month-end rebalancing and a lull related to the fiscal year-end for Canadian banks kept the exchange rate in a tight range as investors avoided getting caught in relatively thin dealings.

"It was a very uneventful day. The fact that it was Canada bank yearend meant trading was somewhat somewhat subdued," said Blake Jespersen, director of foreign exchange sales at BMO Capital Markets. "But the currency shrugged off the selloff in the equity markets, so that bodes well for the Canadian dollar in the short term."

The Canadian dollar ended the North American session at C$0.9967 to the U.S. dollar, or $1.0033, down from Friday's North American session close at C$0.9919 versus the greenback, or $1.0082.

While the currency briefly weakened back below parity with the U.S. dollar after the Bank of Japan intervened to weaken the yen, it ended October on a relatively high note, having regained its position above the greenback.

The Canadian dollar sank below parity with the U.S. dollar in September and weakened as low as C$1.0658 early in October as fears about global growth and the European debt crisis drove investors to the safety and liquidity of the U.S. dollar.

But the currency has since rallied back to parity as the U.S. dollar has weakened. For the month of October as a whole, the U.S. dollar fell 5 percent against the Canadian dollar, its worst month since a 7.3 percent decline in July 2009.   Continued...