Canadian dollar ends higher, looks vulnerable to oil trade

Tue Mar 8, 2011 4:57pm EST
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By Ka Yan Ng

TORONTO (Reuters) - The Canadian dollar edged up to a higher close against the U.S. currency on Tuesday as oil prices trimmed losses suffered after Kuwait's oil minister said OPEC was considering boosting production for the first time in more than two years.

The commodity-linked Canadian dollar -- which often reacts to oil prices because of the country's large oil exports -- rose to C$0.9707 to the U.S. dollar, or $1.0302, up slightly from its overnight high of C$0.9711. It remained locked in the broad range between C$0.97 and C$0.98 that it has been in for more than a week.

"There's not really any clear evidence for it to break C$0.97, but you also have one of the major economic reports for Canada that's going to be coming out later this week," said David Watt, senior currency strategist at RBC Capital Markets.

"I think today is position- and range trading as opposed to anything fundamental going on."

The Canadian dollar finished at C$0.9714 to the U.S. dollar, or $1.0294, up from C$0.9729 to the U.S. dollar, or $1.0279, at Monday's close.

While near-term market focus remains on the price of oil and developments in Libya, several high-profile pieces of Canadian data are still to come and may help determine the timing of Canadian interest rate hikes.

Market players will be searching for evidence that the Canadian economy recovery has momentum when they look at the January trade and February jobs figures that are due on Thursday and Friday, respectively.

VULNERABLE TO OIL   Continued...