Canadian dollar gets boost after Bernanke comments

Thu Jan 10, 2008 5:21pm EST
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By John McCrank

TORONTO (Reuters) - The Canadian dollar see-sawed its way to a higher close against the greenback on Thursday, as weakness in the U.S. dollar, spurred by renewed expectations of aggressive U.S. interest rate cuts, outweighed some soft data on Canadian building permits.

Domestic bond prices ended mixed as dealers positioned themselves ahead of a Canadian jobs report due on Friday.

The Canadian dollar closed at 99.27 U.S. cents, valuing a U.S. dollar at C$1.0074, up from 99.03 U.S. cents, or C$1.0098, at Wednesday's close.

Federal Reserve Chairman Ben Bernanke said in a speech that the U.S. central bank was ready to take "substantive additional action" to support economic growth.

Bernanke's comments firmed market expectations the Fed would cut it benchmark interest rate by 50 basis points to 3.75 percent on January 30, sending the U.S. dollar sharply lower against most major currencies.

That allowed the Canadian dollar to recoup losses from earlier in the session, but the currency was unable to carry the momentum forward.

"We see the Canadian dollar just hovering around parity, even as other currencies are strengthening fairly dramatically against the U.S. dollar," said Camilla Sutton, currency strategist with Scotia Capital.

"It's really the growth story -- what's going to happen to global growth and how does that affect the Canadian economy -- and I think the market is still struggling with that whole issue," Sutton said.   Continued...