Loonie erases early fall and moves higher

Fri Apr 18, 2008 9:57am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar bounced back from an earlier low to move higher versus the U.S. dollar on Friday despite weaker commodity prices and data that showed wholesale trade in Canada unexpectedly fell in February.

Domestic bond prices all but ignored the Canadian data and were pinned lower across the curve as the market has started to believe that the worst of the credit crisis may be over, which has sapped demand for more secure assets.

At 9:40 a.m. EDT, the Canadian unit was at C$1.0073 to the U.S. dollar, or 99.28 U.S. cents, up from C$1.0122 to the U.S. dollar, or 98.79 U.S. cents, at Thursday's close.

In a delayed reaction, the Canadian dollar rallied along with the U.S. currency after Citigroup Inc, the largest U.S. bank, surprised the market with earnings that were not as weak as expected.

But earlier, the domestic currency fell to C$1.0146 to the U.S. dollar, or 98.56 U.S. cents, after data showed wholesale trade fell 1.8 percent in February when the market was looking for a 0.4 percent rise in wholesale activity during the month.

That data knocked the currency from an overnight high that had seen it rise to C$1.0026 to the U.S. dollar, or 99.74 U.S. cents. The rallying U.S. dollar, which left out the Canadian currency at first, also took its toll.

"The big story was the rebound in the U.S. dollar which had forged higher against ... most other currencies and the Canadian dollar had gone along for the ride," said Doug Porter, deputy chief economist at BMO Capital Markets.

But the upbeat news out of the United States bodes well for Canada since it relies heavily on the U.S. economy to consume the bulk of its exports.   Continued...