Dollar slides as greenback firms

Tue Sep 23, 2008 5:00pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar gave back some of its recent gains against a firmer U.S. dollar on Tuesday, after rising 3.4 percent versus its U.S. counterpart over the previous three sessions on uncertainty surrounding the bailout of the U.S. financial sector.

Canadian bond prices fell after data showed that core inflation rose more than expected in August, reinforcing the idea that the Bank of Canada will not be lowering interest rates any time soon.

The Canadian dollar fell 0.3 percent to end the North American session at C$1.0363 to the U.S. dollar, or 96.50 U.S. cents. That was down from C$1.0334 to the U.S. dollar, or 96.77 U.S. cents, at Monday's close.

"After the recent selloff, the U.S. dollar is finding some stability," said Matthew Strauss, senior currency strategist at RBC Capital Markets.

Investors had been selling U.S. dollars over concerns about how Washington was going to finance its planned $700 billion bailout for the U.S. financial sector.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned members of the Senate banking committee of dire consequences for financial markets if the bailout package were delayed, although they gave few concrete details.

"The market is waiting on more detail on the bailout package, so we could end up in a situation where we see another relatively stable day tomorrow, or if some of the details start leaking to the market, it could give direction to the U.S. dollar and, by extension, (U.S.) dollar-Canada," said Strauss.

BOND PRICES SLIDE   Continued...