Loonie ends at par with U.S. dollar

Thu Apr 22, 2010 5:04pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar ended slightly weaker on Thursday to trade exactly at par with the greenback as a less hawkish-than-expected policy report by the central bank reduced some demand for the currency.

The Bank of Canada laid the groundwork to raise interest rates from their record lows, and said it was time to start withdrawing some of the unprecedented monetary stimulus that helped pull Canada out of recession.

But the quarterly Monetary Policy Report was seen as less aggressive than language used by the central bank on Tuesday that left most investors convinced it will start hiking rates in June.

"It wasn't quite as stridently as hawkish as the press statement on Tuesday," said David Watt, senior currency strategist at RBC Capital Markets.

"As a result of that, people weren't necessarily today looking for reasons to go long, risky securities," Watt said.

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

The Canadian dollar finished at exactly C$1 to the U.S. dollar, slightly lower than Wednesday's finish at C$0.9992 to the U.S. dollar, or $1.0008.

The currency touched a high of C$0.9961 to the U.S. dollar, or $1.0039, in the overnight session on the lingering effects of Tuesday's central bank statement.   Continued...