Loonie falls on rate cut outlook

Mon Feb 11, 2008 10:15am EST
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TORONTO (Reuters) - The Canadian dollar slipped against the U.S. dollar on Monday, but was rangebound after the Bank of Canada reiterated interest rates were likely to come down further despite recent data showing the Canadian economy has held up well in the face of the U.S. economic slowdown.

Canadian bond prices followed the larger U.S. Treasury market higher after U.S. equities opened lower.

At 9:40 a.m. EST the Canadian dollar was at 99.80 U.S. cents valuing a U.S. dollar at C$1.0020, up from US$1.0002, valuing a U.S. dollar at 99.98 Canadian cents at Friday's close.

The Canadian dollar held to a tight range of US$1.0010, valuing a U.S. dollar at 99.90 Canadian cents, and 99.80 U.S. cents, making a greenback worth C$1.0020.

"It doesn't seem like there is much out there that's going to drive us out of this range just hovering either side of parity," said Camilla Sutton, currency strategist at Scotia Capital.

Bank of Canada Governor Mark Carney said on Saturday additional interest rate cuts may be needed in Canada as the economy is expected to slow in the face of the U.S. economic downturn.

Carney's comments came despite a jobs report last week that was four times stronger than expected, suggesting the domestic economy is still booming.

The jobs report, which also showed that the unemployment rate returned to October's 33-year low of 5.8 percent, boosted the Canadian dollar by well over a cent to back above parity with the greenback.

But the prospect of lower interest rates in Canada limited the currency's gains.   Continued...