C$ weaker after touching 2009 high; oil weighs

Tue May 5, 2009 4:47pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar weakened against the greenback on Tuesday after reaching its highest level in nearly six months, pressured by a similar reversal in the price of oil and soft equity markets.

The currency has recently traded alongside equity and commodity markets, which have risen as investors bought riskier assets on optimism the global recession is easing.

But North American equity markets were little changed in either direction on Tuesday, as some investors took profits after recent gains. And crude prices fell after hitting a 2009 high as bulging oil inventories and falling energy demand outweighed fragile hopes for an economic recovery.

"It's a bit of a pause after a sharp move but sentiment is still in the market that dollar/Cad should head lower and the Canadian dollar should still head higher," said David Watt, senior currency strategist RBC Capital Markets.

The Canadian unit finished at C$1.1761 to the U.S. dollar, or 85.03 U.S. cents, down from C$1.1735 to the U.S. dollar, or 85.22 U.S. cents, at Monday's close.

Earlier in the session, the currency hit C$1.1677 to the U.S. dollar, or 85.64 U.S. cents, its highest since November 10.

The U.S. dollar rebounded ahead of Thursday's European Central Bank meeting and results of stress tests on U.S. banks, which may show about half of the 19 biggest banks under review need to raise more capital.

With no major Canadian economic data out on Tuesday, markets are watching for employment data, the Ivey Purchasing Managers' Index, and housing reports due later this week. As well, U.S. employment figures are due on Friday.   Continued...