Canadian dollar declines, but moves off 2-week low

Mon Jun 30, 2008 2:26pm EDT
 
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar fell to a two-week low before recovering slightly on Monday, bogged down by profit-taking at the start of a holiday-shortened work week in Canada and the United States.

Domestic bond prices finished lower across the curve with nagging inflation concerns and a stronger-than-expected piece of Canadian data spoiling investor appetite for secure assets like government debt.

At 2:10 a.m., the Canadian unit was at C$1.0184 to the U.S. dollar, or 98.19 U.S. cents, down from C$1.0106 to the U.S. dollar, or 98.95 U.S. cents, at Friday's close.

The currency's decline was pegged to investors who booked profits on the last day of trading in the second quarter and ahead of the Canada Day holiday on Tuesday. Just before midday the currency fell to C$1.0215 to the U.S. dollar, or 97.89 U.S. cents, its lowest level since June 17.

"Just one of those signs when people are taking risk off the board ... they made some money on the Canadian dollar over the last little while and they are just booking it ahead of a holiday," said David Watt, senior currency strategist at RBC Capital Markets.

"Plus you've got enough sort of trip wires for risk over the next few days that people don't want to be sitting in a market that's closed or holding an asset when a market's closed and there's the potential to have things go against you."

The Canadian currency, which rose nearly 1 percent in the second quarter, traded in a wide range in an illiquid market as many market participants took an extended weekend due to the holiday on Tuesday.

Market conditions are expected to remain illiquid for the remainder of the week as U.S. financial markets will be closed Friday for Independence Day.   Continued...

 
<p>A Canadian one dollar coin, also know as a loonie, is shown in Montreal, April 28, 2006. REUTERS/Shaun Best</p>