Loonie posts small gain as U.S. worries weigh

Tue Mar 25, 2008 6:03pm EDT
 
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By John McCrank

TORONTO (Reuters) - The Canadian dollar eked out a tiny gain against the U.S. dollar on Tuesday, but fears of a spillover from the U.S. economic slowdown kept it from gaining more traction after domestic retail sales data came in above market expectations.

Domestic bond prices rallied along with the larger U.S. market after U.S. data painted a picture of a struggling economy that has yet to hit bottom.

The Canadian currency closed at C$1.0173 to the U.S. dollar, or 98.30 U.S. cents, up from C$1.0179 to the U.S. dollar, or 98.24 U.S. cents, at Monday's close.

The currency was given a boost early in the session as Statistics Canada said retail sales rose 1.5 percent in January, beating estimates for a 1.2 percent gain.

But, close on the heels of those numbers, a U.S. report on house prices came in below market expectations. That was followed by another U.S. report showing consumer confidence remained unchanged, but was having its worst run in 14 years.

"Certainly, the worst is not over in the U.S. for sure and I think there still are some worries about the effect that's going to have on Canada," said Steve Butler, director of foreign exchange trading at Scotia Capital.

On the technical side, the currency has been unable to push through its 200-day moving average of C$1.0226 to the U.S. dollar, which may signal more rangebound trading in the days and weeks to come, said Butler.

"People were more interested in buying euros than Canadian dollars today... If we are back in the range, I think Canada is going to get shoved aside by a lot of the players and speculators, and we've just become a slave to the flows."   Continued...