Canada dollar ends lower, but above parity for second day

Wed Apr 21, 2010 5:19pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar closed weaker on Wednesday but held above parity against the greenback for a second straight session, supported by the lingering impact of the Bank of Canada's signal it could raise rates soon.

The Canadian currency finished at C$0.9992 to the U.S. dollar, or $1.0008, a sliver lower than Tuesday's close at C$0.9988 to the U.S. dollar, or $1.0012.

"By and large, the market continues to see Canada as a very strong viable alternative from a global perspective," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

The Canadian currency earlier in the day rose as high as C$0.9931 to the U.S. dollar, or $1.0069 U.S. cents, its strongest level since June 2008.

The Canadian dollar jumped more than 1 U.S. cent on Tuesday after the central bank became the first in the Group of Seven countries to hint it may raise interest rates, possibly as early as June 1.

Currencies usually strengthen as interest rates rise because higher rates tend to attract capital flows.

The currency managed to hold above parity at the close of the North American session on Wednesday even as stock markets notched a lackluster performance and oil prices, a key Canadian export, were slightly weaker.

Some market watchers said the technical outlook for the currency was still bullish. Technical analysis tries to identify price patterns and trends in financial instruments.   Continued...