Dollar falls for fifth straight day

Thu Jun 5, 2008 10:14am EDT
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TORONTO (Reuters) - The Canadian dollar lost steam against the U.S. dollar on Thursday for a fifth straight day, hitting its lowest since May 2, as the view that U.S. interest rates would rise overshadowed a much stronger-than-expected reading on Canadian building permits data .

Domestic bond prices fell along with other global markets on hawkish comments out of the European Central Bank.

At 9:28 a.m., the Canadian dollar was at C$1.0208 to the U.S. dollar, or 97.96 U.S. cents, down from C$1.0183 to the U.S. dollar, or 98.20 U.S. cents, at Wednesday's close.

The currency has dropped 2.7 percent so far this week, largely due to a stronger U.S. dollar, expectations of more interest rate cuts by the Bank of Canada, and the recent drop in oil prices.

The greenback has been boosted by recent comments from U.S. Federal Reserve Chairman Ben Bernanke saying that a weak dollar does not help inflationary pressures.

That has given a bid to U.S. interest rate futures, which favor rising U.S. rates, as the Fed looks to contain inflation.

"We've had a really strong move there with interest rates in the States going up, but there's still an expectation of a couple of rate cuts in Canada, so I think that's been weighing on it (the Canadian dollar)," said David Bradley, director of foreign exchange at Scotia Capital.

Most market players expect the Bank of Canada will cut its key lending rate by 25 basis points to 2.75 percent when it makes a scheduled rate announcement Tuesday. While recent rafts of soft data have the market leaning toward another cut within the next couple bank meetings.

Thursday's building permits data for April flew in the face of that forecast though.   Continued...