Canada dollar ekes out gain on flows; bonds mixed

Fri Dec 14, 2007 5:06pm EST
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By Lynne Olver and John McCrank

TORONTO (Reuters) - The Canadian dollar rose slightly against the U.S. dollar on Friday, bucking a global trend after strong U.S. consumer inflation data caused the greenback to rally against most currencies.

Canadian bond prices were mixed and U.S. treasuries fell, after the U.S. consumer price index for November rose at its fastest pace in more than two years and raised doubts about further Federal Reserve interest rate cuts.

The Canadian dollar closed at C$1.0170 to the U.S. dollar, or 98.33 U.S. cents, up from C$1.0201 to the U.S. dollar, or 98.03 U.S. cents, on Thursday.

The Canadian currency fell as low as 97.59 U.S. cents overnight, down 11.6 percent from its modern-day high of US$1.1039, hit on November 7.

But it rebounded at midday, gave back some gains, and eventually ended the session higher, despite the fact that most other currencies fell against the U.S. dollar, said David Powell, a currency analyst at IDEAglobal in New York.

"The selloff of the Canadian dollar has been pushing its limits and if you look at the price action in the foreign exchange markets today, it seems that (market players) are unwilling to bring the Canadian dollar any lower, given the large amount of ground that the currency has already given up over the past six weeks or so," Powell said.

"I think the market is starting to think that perhaps the move has come quite far."

Other strategists said that corporate and other flows likely played a role in the Canadian dollar's buoyancy.   Continued...