Canada dollar weakens on soft euro zone, U.S. ADP data

Wed May 2, 2012 4:52pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar ended slightly softer against its U.S. counterpart on Wednesday as weaker euro zone and U.S. economic data made investors more pessimistic about the global economic outlook.

The currency followed the trend overseas that saw the euro and world shares fall after data showed euro zone factories sank further into decline last month.

Also weighing on investors' willingness to buy riskier assets, including commodity-linked currencies like the Canadian dollar, was data that showed U.S. private employers added far fewer jobs than expected in April.

But John Curran, senior vice president at CanadianForex, said recent ramped-up expectations of a Bank of Canada rate hike cushioned the currency's fall.

The central bank surprised investors last month with a more positive domestic economic outlook and an explicit warning that it may have to start raising rates again.

"People still have it in the back of their minds that (Bank of Canada Governor) Carney may do something," said Curran.

"We're getting some tailwinds from the Carney comments. People don't really want to believe that he's going to be wrong. Canada is still doing OK. Comparatively speaking the Canadian dollar is holding in quite well."

The Canadian currency finished at C$0.9865 against the greenback, or $1.0137, down a hair from Tuesday's finish at C$0.9858 against the greenback, or $1.0144.   Continued...

An image of the front of the new Canadian 50 dollar bill, made of polymer, is seen on display before a news conference in Quebec City, March 26, 2012. REUTERS/Mathieu Belanger