Canadian dollar dips ahead of BoC

Mon Dec 3, 2007 5:18pm EST
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By John McCrank

TORONTO (Reuters) - The Canadian dollar closed slightly lower against the U.S. dollar on Monday, as investors held off making any big moves ahead of a Bank of Canada interest rate announcement on Tuesday.

Canadian bond prices rose along with the larger U.S. market on credit concerns.

The Canadian dollar closed at 99.98 U.S. cents, valuing each U.S. dollar at C$1.0002, down from US$1.0000 at Friday's North American close.

There was little to influence moves in the currency, with no major domestic data on the docket, but that calm should give way to volatility on Tuesday with the Bank of Canada announcement, said Shaun Osborne, chief currency strategist at TD Securities.

"We've probably got about 50-50 (chance of an interest rate cut) priced into the market right now, so we're going to get some sort of movement tomorrow, I'd guess, regardless of the outcome," he said.

Some experts, including Osborne, feel the central bank may be set to announce its first rate cut since 2004.

But a Reuters poll taken on Friday showed eight of Canada's 13 primary securities dealers expect the central bank will leave rates steady on Tuesday.

Before Friday, market analysts had been more or less split in their expectations, but data showing the Canadian economy grew more than expected in the third quarter tipped sentiment in favor of no move in December.   Continued...