Canadian dollar shaken after weak GDP report

Thu Jul 31, 2008 10:06am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar returned to its losing ways versus the U.S. dollar on Thursday as weak data from both Canada and the United States did not bode well for the domestic economy.

Domestic bond prices were all higher across the curve and making up for losses suffered in the previous session as the latest batch of economic data calmed any talk about interest rates by either the Bank of Canada or U.S. Federal Reserve.

At 9:45 a.m. (1345 GMT), the Canadian unit was at C$1.0244 to the U.S. dollar, or 97.62 U.S. cents, down from C$1.0228 to the U.S. dollar, or 97.77 U.S. cents, at Wednesday's close.

The bulk of the Canadian currency's slide followed domestic data that showed the economy shrank by 0.1 percent in May from April, which missed expectations for a 0.2 percent increase.

Adding to the pressure on the domestic currency was weak U.S. data that did not bode well for a Canadian economy that relies heavily on the United States for consuming the bulk of its exports.

"When we look strictly at the Canadian data we're starting to see a little more evidence of things starting to slow down," said George Davis, chief technical strategist at RBC Capital Markets. "And as the market starts to digest the U.S. numbers even more, a further slowdown there isn't good for us in terms of manufacturing and exports."

Data from the United States showed the number of workers filing claims for new jobless benefits rose more than expected last week, while another report showed the economy grew a touch less than expected in the second quarter.

The Canadian dollar has declined in six of the past seven sessions, with the lone gain only a fraction of a cent.   Continued...