March 24, 2008 / 1:26 PM / 11 years ago

Canadian dollar dragged lower as oil prices slide

 By Frank Pingue
 TORONTO, March 24 (Reuters) - The Canadian dollar was down
versus the U.S. dollar on Monday, but above the two-month low
it touched overnight, weighed down by lower oil prices and a
stronger U.S. dollar in thin markets.
 Domestic bond prices, with no Canadian data to influence a
move, were mostly unchanged ahead of U.S. housing data that
could offer a tone.
 At 9:20 a.m. (1320 GMT), the Canadian unit was at C$1.0250
to the U.S. dollar, or 97.56 U.S. cents, down from C$1.0234 to
the U.S. dollar, or 97.71 U.S. cents, at Thursday's close.
 The currency dropped to C$1.0309 to the U.S. dollar, or
97.00 U.S. cents, overnight, its lowest level since Jan. 23.
 The slide, exaggerated by thin trading over the Easter
holiday, extended last week's 3.6 percent drop as a broadly
stronger U.S. dollar and a decline in commodity prices took
their toll.
 Investors unloaded the commodity-linked Canadian dollar as
oil prices fell nearly $2 to around $100 a barrel.
 "We continue to see some downward pressure on commodity
markets ... and I think that has been a negative for the
Canadian dollar, as well the U.S. dollar has been holding onto
its gains from late last week," said George Davis, chief
technical strategist at RBC Capital Markets.
 "So it's setting up for a bit more topside follow through
for the greenback this week, especially given the fact that
last week it was at extremely oversold levels against lots of
the major currencies."
 With no top-ticket Canadian economic data due this week,
investors will likely pay more attention than usual to the
January retail sales data, which are expected to show a 1.2
percent rise in sales after a 0.6 percent climb in December.
 "It will be looked at just in the sense of what's going on
in terms of consumer spending trends in Canada amidst the
weakness that we're seeing in the U.S.," said Davis. "And if we
do get a weaker-than-expected number, obviously that will add
to the downward pressure on the Canadian dollar."
 Canadian bond prices were mostly unchanged as dealers stuck
close to the sidelines until the 10 a.m. release of U.S.
February existing home sales.
 The figures are seen easing to 4.85 million units from 4.89
million units, which could show further weakness in the economy
and trigger more buying of secure assets like government debt.
 "Markets are still very nervous and this nervousness will
likely remain with us," said Carlos Leitao, chief economist at
Laurentian Bank of Canada in Montreal. "So this could be a good
week for bonds as there could be another flight to quality."
 The two-year bond was unchanged at C$102.77 to yield 2.557
percent. The 10-year bond fell 5 Canadian cents to C$104.28 to
yield 3.451 percent.
 The yield spread between the two- and 10-year bonds was
89.5 basis points, up from 88.8 points at the previous close.
 The 30-year bond slipped 5 Canadian cents to C$118.18 to
yield 3.945 percent. In the United States, the 30-year treasury
yielded 4.219 percent.
 The three-month when-issued T-bill yielded 1.60 percent,
unchanged from the previous close.
 (Editing by Janet Guttsman)

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