Canadian dollar edges higher ahead of Fed

Tue Apr 29, 2008 5:31pm EDT
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By Cameron French

TORONTO (Reuters) - The Canadian dollar edged higher against the U.S. currency on Tuesday, but stayed in a close range as investors looked ahead to a key interest rate decision by the U.S. Federal Reserve.

Domestic bond prices pushed higher, outperforming U.S. treasuries slightly as Canadian stocks fell hard.

The currency finished at C$1.0119 to the U.S. dollar, or 98.82 U.S. cents, up slightly from C$1.0127 to the U.S. dollar, or 98.75 U.S. cents, at Monday's close.

The Canadian currency largely tracked the greenback through the session, with both climbing against the euro as the sense grew that the Fed -- which is expected to lower its key interest rate by a quarter percentage point to 2 percent on Wednesday -- may signal it is ready to stop cutting rates.

"There was a slight, slight bid tone to the Canadian dollar, but it was in very tight ranges," said Matthew Strauss, senior currency strategist at RBC Capital Markets.

Strauss said the Canadian dollar may have benefited slightly from investors reluctant to stay in the greenback on worries the U.S. central bank may surprise by signaling more easing.

The Fed announcement is expected to overshadow February's domestic economic growth data and U.S. first-quarter GDP data due early on Wednesday.

"If we do get some surprises on GDP data, we could see some market reaction, but I would expect it to be relatively brief," said Strauss.   Continued...

<p>Newly pressed Canadian one dollar coins at the Royal Canadian Mint in Winnipeg on November 14, 2007. REUTERS/Fred Greenslade</p>