Canada dollar eases versus charging greenback

Tue Dec 15, 2009 5:02pm EST
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By Cameron French

TORONTO (Reuters) - The Canadian dollar ended slightly lower versus its U.S. counterpart on Tuesday as stronger oil prices could not offset the impact of strong U.S. inflation data, which fueled talk of higher U.S. interest rates and boosted the greenback.

Optimism over North American economic prospects gave both currencies a lift versus the yen and the euro, particularly due to concerns over the health of euro zone banks.

"It's kind of a buy-North American theme we've been seeing," said George Davis, chief technical strategist at RBC Capital Markets, characterizing the interplay between the Canadian and U.S. dollar as a tug-of-war.

"The market's been focused on the better-than-expected data in the U.S., but at the same time, because of the trade relationship with the U.S., there's been some positive spin for the Canadian dollar as well," he said.

The Canadian unit ended the session at C$1.0614 to the U.S. dollar, or 94.22 U.S. cents, down from Monday's close at C$1.0593 to the U.S. dollar, or 94.40 U.S. cents.

The currency hit the day's low of C$1.0652, or 93.88 U.S. cents, early in the session as robust U.S. producer prices data sparked chatter the U.S. Federal Reserve could raise interest rates sooner than expected.

Rising oil prices helped the Canadian dollar rebound as the session progressed, as crude futures gained just under 2 percent on the day, after declining for most of the past two weeks.

Traders will be keeping a close eye on Canadian manufacturing and inflation data over the next two days, but those reports could be overshadowed by the results of the U.S. Federal Reserve meeting on Wednesday as the market will look for any hints about the timetable for possible rate hikes.   Continued...