C$ falls with oil; eyes on Bank of Canada

Mon Jul 12, 2010 4:37pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar fell on Monday due in part to soft oil prices, while investors were slightly cautious about Bank of Canada surveys that showed upbeat business sentiment but worries about the global recovery.

The second-quarter surveys showed businesses were optimistic in their outlook for sales, investment and hiring, but their enthusiasm was tempered by fears that global uncertainties would hurt economic recovery.

In the business survey, companies reported for the first time in two years that past sales activity had improved. But the balance of opinion on future sales -- the difference between the percentage predicting higher sales minus those expecting a drop -- fell to 24 percent from 44 percent in the first quarter.

"The market has been a little cautious in response to the business outlook survey," said Eric Lascelles, chief Canada macro strategist at TD Securities, referring to the future sales headline.

"The market generally is going to be on pins and needles leading up to the Bank of Canada next week," he added.

The surveys showed some slowing in the momentum of the recovery overall, but there were certainly enough positive aspects, said Doug Porter, deputy chief economist at BMO Capital Markets.

"The main message is that the recovery still seems to be on solid ground at least in Canada," he said.

The Canadian dollar finished at C$1.0375 to the U.S. dollar, or 96.39 U.S. cents, down from Friday's finish at C$1.0337 to the U.S. dollar, or 96.74 U.S. cents. Monday's drop followed a gain of 2.8 percent last week.   Continued...