May 12, 2008 / 9:29 PM / 11 years ago

Canada dollar inches higher in lackluster session

TORONTO (Reuters) - The Canadian dollar rose slightly against the U.S. dollar on Monday, but remained stuck in a tight range, while bonds rose as traders took advantage of lower prices after last week’s big selloff.

The Canadian dollar closed at C$1.0044 to the U.S. dollar, or 99.56 U.S. cents, up from C$1.0056 to the U.S. dollar, or 99.44 U.S. cents, at Friday’s close.

The currency spent the session in a range of C$1.0076 to C$1.0025 to the U.S. dollar.

Part of that was due to muted trading as many European markets were closed for holidays, but it was also because traders were just not sure to do with the currency, said David Watt, senior currency strategist at RBC Capital Markets.

“Short-term studies say that the Canadian dollar should rise, but then medium-term studies say it’s a challenging environment for the Canadian dollar,” he said. “That’s why we can’t break out of this range and even the most light of resistance or support levels can’t be broken.”

Much of the uncertainty comes from doubts about the U.S. economic outlook and how that will affect Canada, he said.

The U.S. economy takes in over three-quarters of Canadian exports.

The market did not react to Canadian data that showed the price of new homes edged up 0.2 percent in March, compared with a 0.3 percent rise in February, as it was in line with market expectations.

Year-over-year price growth slowed to 6.1 percent from 6.2 percent in February.

The next piece of data is the survey of manufacturing for March, on Thursday.


Bond prices were flat to higher as traders took advantage of lower prices due to a selloff last week, said Sheldon Dong, fixed income strategist at TD Waterhouse Private Investment.

Bond prices had rallied much higher, but then lost steam toward the end of the session as strength in equities spurred a shift assets to stocks.

The Toronto Stock Exchange’s main index hit a record high on Monday.

The two-year bond was unchanged at C$102.02 to yield 2.729 percent. The 10-year rose 19 Canadian cents to C$103.37 to yield 3.561 percent.

The yield spread between the two- and 10-year bonds was 83.2 basis points, down from 85.6 at the previous close.

The 30-year bond added 43 Canadian cents to C$115.98 for a yield of 4.058 percent. In the United States, the 30-year treasury yielded 4.539 percent.

The three-month when-issued T-bill yielded 2.67 percent, up from 2.62 percent at the previous close.

Editing by Peter Galloway

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