Dollar rises as U.S. rate-hike talk eases

Tue Jun 17, 2008 4:54pm EDT
 
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar closed at its highest level against the U.S. dollar in more than two weeks on Tuesday as soft economic data dampened expectations of a U.S. Federal Reserve interest rate cut and rattled the greenback.

Domestic bond prices rose across the curve and continued to reclaim more of the steep losses suffered last week, given the curbed rate-hike expectations in the United States.

The Canadian dollar closed at C$1.0171 to the U.S. dollar, or 98.32 U.S. cents, up from C$1.0225 to the U.S. dollar, or 97.80 U.S. cents, at Monday's close.

Late in the session the currency rallied to C$1.0168 to the U.S. dollar, or 98.35 U.S. cents, but could not manage to break out of the range it has occupied for much of the year.

Still, it recorded a 0.5 percent gain for the session, its biggest percent gain in a session since April 21.

But, just like on Monday, the Canadian currency's rise was pegged more to a weak greenback after U.S. data and a pair of media reports prompted some market participants to scale back expectations for an early Fed rate hike.

"We really didn't have any interesting news out of Canada today and certainly the U.S. dollar retreated a little bit for most of the session so that helped Canada," said Steve Butler, director of foreign exchange trading at Scotia Capital.

"It feels to me now like the market is in a bit of a quandary about what the Fed is going to be doing when they meet in a week or so."   Continued...