Loonie snaps 4 days of gains ahead of GDP

Fri Mar 2, 2012 8:51am EST
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By Claire Sibonney

TORONTO (Reuters) - The Canadian dollar eased slightly against the U.S. dollar in quiet trade on Friday ahead of quarterly economic growth data, as investors took profits from a string of gains this week that saw Canada outperform all other major currencies.

The Canadian dollar has appreciated more than 2 U.S. cents against the greenback since Monday, from a low of C$1.0050 to a more than five-month high of C$0.9842 on Thursday, on the back of a huge cash injection by the European Central Bank, solid U.S. labor market data and elevated oil prices.

"A lot of clients have seen the improving U.S. economic data, they've seen oil prices moving a lot higher and I think the Canadian dollar just becomes a much more attractive place to invest," said Blake Jespersen, managing director of foreign exchange sales at BMO Capital Markets.

"I think sentiment has really changed this week towards the Canadian dollar, it's appreciated considerably against some of the major currencies, the yen, the euro. We're seeing a lot of money coming back into Canada."

Domestic fourth quarter growth data due at 8:30 a.m. was expected to drive further direction for the Canadian currency.

Analysts polled by Reuters predicted that Canadian economic growth came crashing down to reality to an annualized rate of 1.8 percent in the fourth quarter after a spurt in the third that was due largely to temporary factors.

"It could have a modest impact on the currency no doubt, especially if it comes in a little weaker than expected I think you'd see a bit more aggressive profit taking on the back of that so we are definitely positioned that way," added Jespersen.

He said resistance for the Canadian currency was in place around C$0.9850 and support was seen holding between C$0.9915-80.   Continued...

A Canadian five-dollar bill is seen in this posed photograph in Montreal March 10, 2011. REUTERS/Shaun Best