Canadian dollar dips a touch as oil prices drop

Tue Jul 8, 2008 10:28am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was little changed against the U.S. dollar on Tuesday as the market tried to gauge how lofty commodity prices will affect Canada's economy, while key domestic jobs data due later this week also limited moves.

Domestic bond prices, amid a dearth of data incentives, were down across the curve as the Bank of Canada marked the effective end of a funding crunch in Canadian money markets.

At 10:00 a.m. EDT, the Canadian unit was at C$1.0202 to the U.S. dollar, or 98.02 U.S. cents, down slightly from C$1.0189 to the U.S. dollar, or 98.15 U.S. cents, at Monday's close.

With no Canadian data due until the June housing starts report is released on Wednesday, the Canadian currency was steady as the market considered how lofty commodity prices could hurt global demand for key Canadian exports such as oil.

Amid a backdrop of equity market concerns, traders tried to assess what that would mean for the global economic outlook and demand for Canada's main exports.

"That brings in something which is of, we think, more direct concern to the Canadian dollar and that's the overall demand for commodities over the next year or two," said David Watt, senior currency strategist at RBC Capital Markets.

"But the reason we are not getting specific traction on the Canadian dollar causing it to weaken off is we still have oil near $140 (a barrel) and it's still uncertain how the global economy is going to fall out."

U.S. light crude oil prices fell more than 3 percent to about $136 a barrel, down considerably from last week's record high near $146 a barrel, and that took the Canadian dollar down slightly as well.   Continued...

<p>Newly pressed Canadian one dollar coins, also know as loonies, at the Royal Canadian Mint in Winnipeg, November 14, 2007. REUTERS/Fred Greenslade</p>