April 7, 2014 / 1:57 PM / 5 years ago

C$ weakens on consolidation after last week's gains

TORONTO (Reuters) - The Canadian dollar weakened against the greenback on Monday as investors consolidated positions, giving back some of the gains the currency made last week after a strong domestic jobs report.

In the backdrop was the provincial election in Quebec, with polls closing at 8 p.m. EDT on Monday. But with the governing separatist party behind in public opinion surveys, the loonie was not expected to see much impact.

The Canadian dollar rose strongly at the end of last week after data showed the domestic economy added twice as many jobs as expected in March.

“We’re really seeing a consolidation from Friday’s price action, that’s mainly what’s leading the slide in the loonie this morning,” said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

Last week’s data had pushed the loonie through C$1.10, which had been a psychologically important support level for the U.S. dollar-Canadian dollar pairing. That level will likely continue to be a meaningful pivot for the currency, Smith said.

“This level is going to be pretty important resistance on the way back up if the U.S. dollar starts to gain more strength here,” he said.

The Canadian dollar was at C$1.0997 to the greenback, or 90.93 U.S. cents, weaker than Friday’s close of C$1.0981, or 91.07 U.S. cents.

In Quebec, the latest opinion polls show the Liberals ahead of the separatist Parti Quebecois, which has tamped down concerns over a possible referendum on independence from Canada.

In the past, Quebec has had two referendums on whether to separate, both of which failed. The separatists lost the last one in 1995, but by just over one percentage point.

“Compared to the other two situations where Quebec had their referendum and we saw the Canadian dollar weaken off quite significantly, I don’t think there’s a big risk for this election,” Smith said.

“Markets obviously don’t like indecision, and they don’t like the possibility of potentially having a referendum, but that’s been played down over the last few weeks.”

Canadian government bond prices were higher across the maturity curve, with the two-year up 1 Canadian cent to yield 1.082 percent, and the benchmark 10-year up 18 Canadian cents to yield 2.472 percent.

Editing by Peter Galloway

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