Canadian dollar bounces off session low, ends flat

Thu Dec 6, 2007 5:20pm EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar ended flat against the greenback on Thursday but moved comfortably off a session low as domestic data topped estimates and the Bank of Canada said the currency returned to a more suitable range.

Domestic bond prices were pinned lower as building permits data topped expectations, equity markets rallied and dealers positioned themselves ahead of key jobs data due on Friday.

The Canadian dollar closed at 98.49 U.S. cents, valuing a U.S. dollar at C$1.0153, unchanged from Wednesday's close.

Despite the flat close, the Canadian dollar rallied sharply from a session low of 98.08 U.S. cents, or C$1.0195, due mostly to strong Canadian economic data and Bank of Canada Governor David Dodge's comments that the dollar was back in a comfortable range for the country's economy.

"We've had a lot of central bank and finance minister speak about the worries over the currency and how far it's gone and today Dodge came out and said it's back to where we thought it should be," David Watt, senior currency strategist at RBC Capital Markets, said. "That certainly gave the market a sigh of relief and I think it's reflective in the price action today."

Dodge, speaking to a Senate banking committee, said the fall in the Canadian dollar since hitting a modern-day high of US$1.1039 on November 7 has put it back in a range the bank thought made sense in its economic forecasts.

Those comments, along with better-than-expected readings on Canadian building permits and Ivey Purchasing Managers Index helped the currency make up for losses suffered on Wednesday when it hit its lowest level since September 18.

Since its November peak, the Canadian dollar has been hit with a combination of lower commodity prices, several pieces of weak domestic data and a Bank of Canada rate cut.   Continued...