TORONTO (Reuters) - The Canadian dollar slipped versus the U.S. dollar on Friday and closed lower for the week as nagging concerns about the impact of the U.S. economic slowdown on Canada weighed on the currency.
Canadian bond prices finished higher across the curve as weak U.S. economic data and a disappointing profit outlook from General Electric (GE.N) convinced investors to unload equities in favor of more secure assets such as government debt.
The Canadian dollar closed at C$1.0234 to the U.S. dollar, or 97.71 U.S. cents, down from C$1.0188 to the U.S. dollar, or 98.15 U.S. cents, at Thursday’s close.
For the week, the Canadian dollar fell 1.4 percent, erasing a two-week win streak during which the currency rose 1.4 percent.
The Canadian dollar has been wedged in a range of about 97 U.S. cents and C$1.03 for months and it is not expected to bust out of the range any time soon as the market has been showing little interest in North American currencies.
“With the overseas currencies it looks like you’re seeing the U.S. dollar moving down a bit ... but we haven’t seen that play out with respect to the Canadian dollar,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.
“So maybe some concerns about weakness in the U.S. spilling over to Canada has prevented the loonie from benefiting from the move lower in the U.S. dollar versus overseas currencies.”
The slide in the Canadian dollar came early in the session before it settled into a tight range ahead of the weekend.
The Canadian currency rallied during the overnight session on Friday, rising to C$1.0133, due mainly to a technical move as the greenback was unable to break above the C$1.0225 level during Thursday’s North American session.
But a report in the Wall Street Journal that said Bank of Nova Scotia has entered the bidding for Cleveland-based National City bank triggered a turnaround.
A Bank of Canada Business Outlook Survey due on Monday will grab the market’s attention, but the U.S. retail sales report due the same day will likely dictate direction.
Other key reports due next week include the March consumer price index reports for the United States and Canada.
The rise in bond prices was supported by Canadian data that missed estimates, but the gains were powered more by a U.S. report that signaled consumer confidence dropped to its lowest level in 26 years and by the GE news.
The latest Canadian data showed the price of new homes in Canada rose by 0.3 percent in February from January, which was below the 0.4 percent rise expected by analysts.
GE had a disappointing profit and cut its 2008 earnings forecast, which added to recession fears in the United States and sent North American equity markets tumbling at the open.
And the U.S. consumer confidence report for early April showed heightened worries over inflation and jobs.
“Once again data abetted concerns in the U.S. about a recession and with that you got yields pressured lower in the U.S. and we got some spillover into Canada,” Ferley said.
The two-year bond rose 14 Canadian cents to C$102.20 to yield 2.679 percent. The 10-year bond rose 58 Canadian cents to C$103.48 to yield 3.550 percent.
The yield spread between the two- and 10-year bonds was 87.1 basis points, up from 87.6 basis points at the previous close.
The 30-year bond jumped 90 Canadian cents to C$116.00 to yield 4.058 percent. In the United States, the 30-year Treasury yielded 4.297 percent.
The three-month when-issued T-bill yielded 2.38 percent, up from 2.35 percent at the previous close.
Editing by Peter Galloway