Dollar trickles lower, awaits Fed decision

Mon Dec 10, 2007 4:54pm EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar finished almost unchanged against the greenback on Monday as comments from the Bank of Canada were unable to inspire a move ahead of the U.S. Federal Reserve interest rate decision on Tuesday.

Canadian bond prices ended lower across the curve as the sole piece of domestic economic data topped expectations and left little interest in safe-haven assets such as government debt.

The Canadian dollar closed at 99.41 U.S. cents, valuing a U.S. dollar at C$1.0059, down from Friday's session close of 99.49 U.S. cents, or C$1.0051.

With no key data to inspire a move and comments from Bank of Canada Governor David Dodge consistent with his recent talk, traders avoided huge bets until hearing from the Fed on Tuesday. The market expects the Fed to cut its key rate by quarter-percentage point to 4.25 percent.

"The price action is best described as benign," said Jack Spitz, director of foreign exchange at National Bank Financial. "The markets are not eager to take on added risk until it sees the communique coming from the Fed tomorrow."

If the Fed does deliver on the widely expected rate cut, it would put Canadian and U.S. interest rates back on par at 4.25 percent following the Bank of Canada's rate cut last week.

During a Toronto speech, Dodge said a lack of transparency in asset-backed securities means the unraveling of global financial market turmoil has taken longer than expected.

The speech and comments during the ensuing press conference were not enough to knock the Canadian dollar out of the 98.81 to 99.49 U.S. cent range it occupied during the session.   Continued...

<p>Newly pressed Canadian one dollar coins, also know as loonies, at the Royal Canadian Mint in Winnipeg November 14, 2007. The Canadian dollar slipped against the U.S. dollar on Monday as another multibillion dollar writedown on subprime mortgage exposure rattled nerves and amid cautious trading ahead of an expected interest rate cut by the U.S. Federal Reserve on Tuesday. REUTERS/Fred Greenslade</p>