Loonie benefits from U.S. dollar's weakness

Mon Jan 28, 2008 5:52pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By John McCrank

TORONTO (Reuters) - The Canadian dollar firmed against the U.S. dollar on Monday, as anticipation of further interest rate cuts by the U.S. Federal Reserve lessened the greenback's appeal.

Domestic bond prices ended slightly higher, ahead of flurry of U.S. data that is expected to overshadow any Canadian numbers as the market frets over the possibility of a recession in the world's biggest economy.

The Canadian unit ended the session at C$1.0044 to the U.S. dollar, or 99.56 U.S. cents, up from C$1.0070 to the U.S. dollar, or 99.30 U.S. cents, at Friday's close.

The currency spent the session in a range of C$1.0088 to the U.S. dollar, or 99.13 U.S. cents, and C$1.0023 to the U.S. dollar, or 99.77 U.S. cents.

The Canadian dollar is likely to stay rangebound ahead of the Fed's interest rate announcement on Wednesday, which will likely lead to more U.S. dollar weakness, said Camilla Sutton, currency strategist at Scotia Capital.

The Fed has cut interest rates by 175 basis points since September, lessening the greenback's appeal, and more easing is expected in the near-term to boost economic growth.

Data showing that U.S. new home sales dropped to their lowest rate in nearly 13 years stoked U.S. recession fears and reinforced market expectations of a 50-point cut by the Fed after it wraps up its policy meeting on Wednesday.

That would put the fed funds rate at 3.00 percent, compared to the Bank of Canada's key lending rate of 4.00 percent.   Continued...