Dollar ekes out gain in lackluster session

Tue Apr 15, 2008 5:03pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar closed flat versus the U.S. dollar on Tuesday in a lackluster session in which the positive impact of record high oil prices was erased by nagging concerns about the U.S. economy.

Bond prices, with no Canadian data to consider, finished lower across the curve as the latest data from the United States suggested further interest rate cuts there may not be as large as some analysts have forecast.

The Canadian dollar closed at C$1.0191 to the U.S. dollar, or 98.13 U.S. cents, up from C$1.0196 to the U.S. dollar, or 98.08 U.S. cents, at Monday's close.

Much of the currency's gain was attributed to a rally in oil prices to a record high near $114 a barrel, which helped lift the Canadian dollar since Canada is a key producer and exporter of oil.

But holding the Canadian dollar back from making a bigger run against the greenback was a rather tempered gain in U.S. equity markets, which have had a close link to the currency's performance in recent months.

"The rally in the oil prices supported the Canadian dollar somewhat today, but as we've seen of late the Canadian dollar has been much more driven by changes in equity markets," said Matthew Strauss, senior currency strategist at RBC Capital Markets.

"There was not any indication that the market has more confidence in the U.S. economy or more confidence in the global economy ... what we need is a good half- or 1-percentage point increase (in the Dow Jones industrial average), which could potentially indicate sentiment change."

The Toronto Stock Exchange's main index jumped 112 points on Tuesday, and the Dow Jones industrial average .DJI ended 60 points higher, but a good chunk of its O.49 percent gain was recorded in the session's closing minutes.   Continued...