Canadian dollar flat against US dollar, bonds up

Tue Apr 29, 2008 8:53am EDT
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By John McCrank

TORONTO, April 29 (Reuters) - The Canadian dollar was flat against the U.S. dollar on Tuesday as investors pondered whether the U.S. interest rate-cutting cycle was coming to an end.

Domestic bond prices, with no major Canadian data to influence direction, rose as investors took advantage of lower prices after a string of losses in recent weeks.

At 8:34 a.m. (1234 GMT), the Canadian dollar was at C$1.0127 to the U.S. dollar, or 98.75 U.S. cents, unchanged from Monday's close.

Indeed, the greenback was stronger across the board, with the Canadian dollar being the exception.

"It seems to be that there is a general perception growing that the damage that we've seen to the U.S. economy is spreading somewhat to the rest of the world," said Adam Cole, head currency strategist at RBC Capital Markets.

"And because Canada is seen as being strongly keyed into the U.S. economic cycle, it is not being damaged by worsening sentiment on the world outside the U.S. the way the other currencies are," he said.

Weak economic data out of Europe signaled that monetary policy there may have to tighten, while in the U.S., it seems as though the U.S. Federal Reserve's easing campaign may be coming to a halt.

The market is expecting the Fed to lower its key lending rate by 25 basis points on Wednesday, to 2.0 percent, and then to signal that it will be on hold. See: [ID:nFEDAHEAD]   Continued...