Canadian dollar unable to escape funk, ends lower

Thu Aug 7, 2008 4:54pm EDT
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 * Canadian dollar falls for fifth straight session
 * Canadian building permits fall unexpectedly in June
 * Friday's June employment report for Canada in focus
 By Frank Pingue
 TORONTO, Aug 7 (Reuters) - The Canadian dollar skidded to a
lower close versus the U.S. dollar for the 11th time in the
past 12 sessions on Thursday and the sudden downturn for the
once-resilient currency showed no signs of easing.
 Canadian bond prices closed higher across the curve due to
slew of factors including a Canadian building permits report
that missed estimates and comments from the European Central
Bank about weaker economic growth.
 The Canadian dollar closed at C$1.0530 to the U.S. dollar,
or 94.97 U.S. cents, down from C$1.0477 to the U.S. dollar, or
95.45 U.S. cents, at Wednesday's close.
 After trading in a tight range versus the greenback for
most of this year, the Canadian currency has fallen through key
technical levels and has been unable to put a convincing end to
its slump.
 "It's one of those big turns in market sentiment that is
the underlying thing here and I don't think there is anything
specifically related to Canada that is behind this move," said
Shaun Osborne, chief currency strategist at TD Securities.
 "After having traded in a very tight range around parity
for so long it feels a little but overdue in fact, and I think
this probably has a little bit more to run here."
 Concerns about global growth have crimped commodity demand
in recent weeks and also weighed heavily on oil prices, which
has hurt the Canadian dollar since Canada is considered a key
exporter of oil.
 But the latest drop in the Canadian dollar was due largely
to a rally in the greenback, which hit a 5-1/2 month high
versus a basket of major currencies after data that showed a
surprise rise in U.S. home sales in June.
 The key Canadian employment report due out on Friday may
dictate where the Canadian dollar is headed as traders will
likely unload the currency if the report fails to meet market
 Canada's economy is expected to have added 5,000 jobs in
June after shedding 5,000 jobs in May, which was the biggest
drop since August 2006. The unemployment rate is expected to
remain steady at 6.2 percent.
 "If we were to see even a modestly softer number the market
is going to lean again on the Canadian dollar because that's
the way the market wants to trade at the moment," Osborne
 Canadian bond prices all ended higher as data that showed a
steeper-than-expected 5.3 percent fall in Canadian building
permits in June signaled a downturn for the housing market.
 Also helping bond prices was a bleak U.S. jobless claims
report and comments from European Central Bank President
Jean-Claude Trichet, who said he expects economic growth in the
euro zone to weaken substantially this year.
 "We did have weak data in the United States and I think
there is some trepidation about the jobs number tomorrow," said
Mark Chandler, fixed income strategist at Royal Bank of Canada.
"Plus we got bond markets everywhere rallying today so Canada
got its fair share of that."
 The two-year bond rose 14 Canadian cents to C$101.71 to
yield 2.770 percent. The 10-year bond climbed 49 Canadian cents
to C$104.97 to yield 3.642 percent.
 The yield spread between the two-year and 10-year bond was
103 basis points, up from 95.2 basis points.
 The 30-year bond added 82 Canadian cents to C$115.64 for a
yield of 4.073 percent. In the United States, the 30-year
Treasury yielded 4.551 percent.
 The three-month when-issued T-bill yielded 2.53 percent,
unchanged from the previous close.