Canadian dollar edges higher as key data looms

Mon Feb 4, 2008 4:34pm EST
 
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 By Frank Pingue
 TORONTO, Feb 4 (Reuters) - The Canadian dollar finished a
touch higher against the U S. dollar in a lackluster session on
Monday as a rise in oil prices was not enough to spark a move
ahead of key domestic data due later in the week.
 Domestic bond prices ended lower as dealers pocketed gains
following a rally on Friday when economic data from the United
States suggested more rate cuts there.
 The Canadian dollar closed at US$1.0067, valuing a U.S.
dollar at 99.33 Canadian cents, up slightly from US$1.0060 to
the U.S. dollar, or 99.40 Canadian cents, at Friday's close.
 In a session that lacked any real direction, the Canadian
dollar was knocked around in a range of US$1.0077 to C$1.0007
to the U.S. dollar.
 "It's been a pretty quiet day," said George Davis, chief
technical strategist at RBC Capital Markets. "There wasn't much
economic data in the market and the other currencies were not
really moving around all that much either."
 With a lack of data to support a move in either direction,
the domestic currency drew support from a favorable Canada-U.S.
interest rate gap established Jan. 22 when the U.S. Federal
Reserve delivered a surprise rate cut.
 That rate reduction lifted the Canadian dollar from a
four-month low and eventually helped lift it back above parity,
a level many experts expect it to straddle for much of the
year.
 Also offering support for the Canadian dollar was a rebound
in oil prices back over $90 a barrel. Canada is a key producer
and exporter of oil and its currency often follows prices for
the commodity.
 While the Canadian market will digest some economic data
releases midweek, the headline reports will be the January jobs
and housing starts figures on Friday.
 The domestic currency had little reaction to comments from
senior Canadian finance officials ahead of a high-level meeting
in Tokyo on Saturday, which the officials said will include
talk about the impact on the global economy of interest rates.
 At the talks, the Group of Seven finance ministers and
central bank chiefs will also continue to stress the need for
China to adopt a more flexible currency.
 "I don't think there was anything overly new in terms of
information for the market," said Davis. "And that probably
explains, in part, why things have been so quiet and there
hasn't been much of a reaction."
 BONDS DIP
 Bond prices ended lower across the curve as the lack of any
fresh economic data convinced dealers to book profits following
Friday's rally when U.S. non-farm payrolls data came in well
below expectations.
 The bond market will likely be influenced by the moves in
equities, which were relatively stable on Monday, ahead of the
economic data due later this week.
 "It's a bit of a retraction from what occurred on Friday,"
said Max Clarke, economist at IDEAglobal in New York. "And we
might just see this continue in the coming days."
 The two-year bond dipped 4 Canadian cents to C$101.91 to
yield 3.158 percent. The 10-year bond fell 21 Canadian cents to
C$101.19 to yield 3.846 percent.
 The yield spread between the two- and 10-year bond was 68.8
basis points, up from 68.3 points at the previous close.
 The 30-year bond slid 45 Canadian cents to C$114.14 to
yield 4.160 percent. In the United States, the 30-year treasury
yielded 4.377 percent.
 The three-month when-issued T-bill yielded 3.34 percent,
down from 3.36 percent the previous close.