Canada dollar droops despite upbeat data, bonds up

Mon Mar 31, 2008 10:00am EDT
 
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By John McCrank

TORONTO (Reuters) - The Canadian dollar fell against the U.S. dollar on Monday, as weary investors were loath to bet on the currency despite a report showing the economy grew slightly faster than the market expected in January.

Domestic bond prices rose due to Canada's strong economic ties to the faltering U.S. economy, all but ignoring January's gross domestic product report.

At 9:29 a.m. EDT, the Canadian unit was at C$1.0250 to the U.S. dollar, or 97.56 U.S. cents, down from C$1.0215 to the U.S. dollar, or 97.90 U.S. cents, at Thursday's close.

Canada's economy bounced back in January after a contraction in December with broad-based growth, including in areas like auto manufacturing and wholesale trade, Statistics Canada said.

Gross domestic product grew 0.6 percent, beating expectations of 0.5 percent growth. That's the biggest monthly increase since April 2005 and nearly offsets the 0.7 percent slide in December.

The lack of a market response to the news shows how out of favor the Canadian dollar has become, said Doug Porter, deputy chief economist at BMO Capital Markets.

"A market that doesn't respond bullishly to bullish news isn't bullish and we saw a classic example of that this morning where a relatively upbeat GDP report, even though it was largely as expected, really didn't support the currency at all."

Fears that the Canadian economy will be dragged lower by the economic woes in the United States have weighed on the Canadian dollar, despite robust prices for the commodities the country exports.   Continued...