Canada dollar dips as investors await inflation data

Wed Jun 18, 2008 9:48am EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar slipped 0.3 percent against the U.S. dollar on Wednesday, but remained in a tight range ahead of key data later in the week and an interest rate decision by the U.S. Federal Reserve next week.

Domestic bond prices followed U.S. Treasuries higher.

At 9:24 a.m., the Canadian dollar was at C$1.0199 to the U.S. dollar, or 98.05 U.S. cents, down from C$1.0171 to the U.S. dollar, or 98.32 U.S. cents, at Tuesday's close.

In the overseas session, the currency traded in a tight range of C$1.0212 and C$1.0172, as traders were unsure which way to take it ahead of Thursday's domestic inflation report and next week's U.S. Fed decision on interest rates.

Inflation has been front and center in many investors' minds as central banks worldwide attempt to balance slowing global growth with spiking energy and food costs.

Bank of Canada Governor Mark Carney held the bank's key lending rate steady at 3.00 percent last week, citing rising inflation, confounding expectations of Canada's primary security dealers, who had unanimously expected the central bank to ease rates.

"The CPI report is either going to justify his (Carney's) actions, or it might bring a lot of people to question what he was thinking, so it is quite an important number tomorrow," said Steve Butler, senior currency strategist at Scotia Capital.

Carney will give a speech later on Thursday in Calgary, where investors are hoping for an explanation of the bank's last decision.   Continued...