Canadian dollar turns lower as greenback rallies

Wed Jul 30, 2008 10:26am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was down versus a rallying U.S. dollar on Wednesday as oil prices eased and traders shrugged off Canadian economic data that topped estimates as they awaited the May gross domestic product report due Thursday.

Canadian bond prices were lower across the curve along with the bigger U.S. Treasury market due to upbeat data from both sides of the border, which curbed investor appetite for more secure assets.

At 9:50 a.m. EDT, the Canadian currency was at C$1.0253 to the U.S. dollar, or 97.53 U.S. cents, down from C$1.0238 to the U.S. dollar, or 97.68 U.S. cents, at Tuesday's close.

The Canadian dollar, which has been locked in a tight range versus the greenback all week, barely budged after a report showed Canadian producer prices rose by 1.3 percent in June from May, while the price of raw materials increased by 4.4 percent from May. Both figures were ahead of estimates.

"The industrial product prices data don't really play a big role in the Bank of Canada's policy, it tends to tell us more about corporate profitability than inflation pressure," said Doug Porter, deputy chief economist at BMO Capital Markets.

"Having said that, it's still definitely on the high side and notable that the Canadian dollar didn't really get any support from that."

As in recent weeks, it was ongoing pressure on oil prices and a stronger U.S. dollar that weighed on the Canadian dollar on Wednesday.

Traders were keeping an eye on oil prices, which slipped to $122 a barrel ahead of U.S. data that is expected to show rising fuel inventories and weak demand.   Continued...