Canadian dollar bounces off 2-1/2 week low

Mon Jan 7, 2008 9:44am EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar bounced off a two-and-a-half-week low against the U.S. dollar on Monday morning, reversing a data-related stumble during the holiday-shortened preceding week.

Domestic bond prices fell across the curve as dealers adjusted positions following exaggerated moves last week when weak data sparked rallies.

At 9:10 a.m. (1410 GMT), the Canadian dollar was at US$1.0015, valuing a U.S. dollar at 99.85 Canadian cents, up from 99.87 U.S. cents, or C$1.0013, at Friday's close.

During the overnight session, the Canadian dollar had fallen to 99.21 U.S. cents, or C$1.008, its lowest level since December 19, as gold and oil prices came off recent highs.

The overnight slide extended Friday's one-cent drop after the Ivey Purchasing Managers Index, not normally a market mover, showed Canadian purchasing activity sagged in December.

"I think what we're seeing in markets overall is a bit of a reversal from Friday's very big move," said Doug Porter, deputy chief economist at BMO Capital Markets.

"Markets may have pulled a little too far to one side of the boat on Friday and that's especially true for the Canadian dollar's response to the Ivey index."

The hit from the data knocked the Canadian dollar down 2.1 percent during a week that had seen it rally sharply as oil and gold prices both hit record highs -- a positive for the currency as Canada is a key energy and gold producer.   Continued...