Canadian dollar pares gains on weak North American data

Tue Jan 31, 2012 5:19pm EST
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By Jon Cook

TORONTO (Reuters) - The Canadian dollar closed unchanged on Tuesday as soft North American economic data offset support provided by gains in commodity prices on optimism that progress was being made to alleviate the euro zone debt crisis.

Data that showed Canada's economy contracted in November for the first time since May was followed by a steeper-than-expected decline in U.S. home prices in November and flagging U.S. consumer confidence figures for January.

That combination of economic gloom put the brakes on the commodity-driven Canadian dollar's strong overnight push through parity with the greenback to C$0.9966, its highest level in three months.

"Based on the data that we had it didn't make sense for the Canadian dollar to be trading below parity," said Darcy Browne, managing director of capital markets trading at CIBC World Markets.

Canada's dollar finished at C$1.0028 to the U.S., or 99.72 U.S. cents, unchanged from its Monday close. It finished January up 1.7 percent, its first monthly rise since October.

Statistics Canada said real gross domestic product fell 0.1 percent in November. Economists had forecast an increase of 0.2 percent.

The weak data was not expected to alter Bank of Canada monetary policy in the near term but left the market deflated.

"The number was definitely a bit softer than expected, but in terms of policy implications we know the bank's on hold here for some time," said Shaun Osborne, chief currency strategist at TD Securities.   Continued...