Canadian dollar firms a bit; equity rally hits bonds

Thu Mar 3, 2011 4:56pm EST
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By Ka Yan Ng

TORONTO (Reuters) - Canada's dollar finished a touch higher against the greenback on Thursday in a session in which the currency was mainly a spectator to the major events in the foreign exchange market.

Market focus moved to the European Central Bank after comments by ECB President Jean-Claude Trichet reinforced expectations of a near-term interest rate rise, sparking a rally in the euro.

The price of oil, a key Canadian export, fell and provided little support for the currency after Venezuela said its proposal for a negotiated solution to the Libyan conflict was accepted by the North African government, and the Arab League said the plan was being considered.

The Canadian dollar briefly fell as low as C$0.9754 to the U.S. dollar, or $1.0252, but quickly returned to trade close to Wednesday's finish. Overall, the currency moved in a 37-point range, narrower than in the previous session.

The Canadian dollar closed at C$0.9722 to the U.S. dollar, or $1.0286, up from Wednesday's North American finish of C$0.9724, or $1.0284.

"We're sitting back with our sunglasses on and everyone is leaving (the Canadian dollar) alone. Everything else seems to be moving around it. It may take a while to break below this C$0.97 level firmly," said John Curran, senior vice president at CanadianForex.

The Canadian dollar has largely been moving between C$0.97 and C$0.98 for the past five sessions, with brief forays outside that band.

The Canadian dollar could come under pressure in the weeks ahead as election talk swirls around the federal budget, due to be presented on March 22. The three opposition parties will have to decide whether to support the minority Conservative government's budget in the House of Commons or risk facing an election.   Continued...