TORONTO (Reuters) - The Canadian dollar was little changed near one-week lows on Thursday, failing to gain traction despite a move lower by the U.S. dollar on speculation about another dose of stimulus by the Federal Reserve.
While most currencies gained against the U.S. dollar overnight, the Canadian dollar was mostly flat, weighed by a string of weak economic data and market skepticism that the Bank of Canada can really deliver on its hawkish sentiment.
“It seems kind of unbelievable that the Bank of Canada is going to be raising rates anytime soon -- in fact I think the market is pricing in only a 12 percent change of a move by year end,” said David Bradley, director of foreign exchange trading at Scotiabank.
“If you look at the last three or four economic indicators, they’ve been quite soft -- retail sales, CPI, unemployment -- so that is preventing further Canadian dollar strength as well.”
Bank of Canada Governor Mark Carney in remarks on Wednesday repeated similar language used last month when keeping rates unchanged, saying “some modest withdrawal of the present considerable monetary policy stimulus” might become appropriate.
Signals from the U.S. Federal Reserve that another dose of stimulus measures could come “fairly soon” lifted global shares on Thursday and pushed the U.S. dollar to a two-month low, outweighing poor economic data from China and Europe. <MKTS/GLOB>
But Canada’s currency did not follow other currencies higher. The Canadian dollar was trading at C$0.9916 versus the U.S. dollar, or $1.0085, little changed from Wednesday’s North American session close at C$0.9914, or $1.0087.
Bradley said the currency would likely trade in a one cent range between C$0.9850 and C$0.9950 in the near term and in an event tighter range for the day.
“We’re probably going to see demand for dollars near the overnight lows at C$0.9880-C$0.9885, so that’s going to limit the downside, and I would think the topside is capped at about C$0.9915-C$0.9920 for the time being,” Bradley said.
Canadian bond prices were mostly lower across the curve, with the two-year bond losing 15 Canadian cents to yield 1.117 percent and the benchmark 10-year bond trimming 10 Canadian cents to yield 1.850 percent.
Reporting By Andrea Hopkins