Dollar lower despite upbeat GDP data

Mon Jun 30, 2008 9:53am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was down versus the U.S. dollar on Monday as an upbeat piece of domestic data could not sway sentiment on the economy in a muted session ahead of the Canada Day holiday on Tuesday.

Domestic bond prices were lower across the curve due to a combination of better-than-expected Canadian gross domestic product data and ongoing inflation worries.

At 9:35 a.m., the Canadian unit was at C$1.0137 to the U.S. dollar, or 98.65 U.S. cents, down from C$1.0106 to the U.S. dollar, or 98.95 U.S. cents, at Friday's close.

Canada's gross domestic product was 0.4 percent in April, which was a touch above expectations and also ended two straight months of contractions.

But the data was not enough to offer a bid to the Canadian dollar since it was fueled by a rebound in manufacturing, made possible by a rebound in motor vehicle production after a sharp drop in the prior month.

"It's all a bounce back story," said Eric Lascelles, chief economics and rates strategist at TD Securities.

"In my mind going forward we are still going to have to look for a fairly soft general trend and the Bank of Canada probably persuaded to remain on hold by the likes of these sorts of numbers."

The commodity-linked Canadian dollar had rallied during the overnight session to C$1.0062 to the U.S. dollar, or 99.38 U.S. cents, due in part to higher oil prices.   Continued...