March 27, 2008 / 9:07 PM / in 10 years

Canadian dollar flat despite robust commodities

TORONTO, March 27 (Reuters) - The Canadian dollar was almost unchanged against the U.S. dollar on Thursday as ongoing concerns about the economy of Canada’s biggest trading partner kept it from riding robust commodity prices higher.

Canadian bond prices were mixed as investors squared their books heading into the end of the month and the quarter.

The Canadian unit closed at C$1.0184 to the U.S. dollar, or 98.19 U.S. cents, up a tad from C$1.0188 to the U.S. dollar, or 98.15 U.S. cents, at Wednesday’s close.

The Canadian dollar has stayed stubbornly in a range of 96.61 U.S. cents to US$1.0256 since the end of November and does not appear to be about to break out of it any time soon, said Shaun Osborne, chief currency strategist at TD Securities.

That is because the U.S. economy is faltering and Canada is thought likely to soon feel the spillover effect from a slowdown in its biggest trading partner.

Investors see little benefit in betting one currency against the other.

“You have to look outside the dollar-Canada exchange rate to really see what’s going on with the Canadian dollar,” Osborne said.

The currency was weaker against the euro and the pound, and while it was up a touch against the Japanese yen, it has been on a losing streak there too in recent weeks.

That is despite the fact that Canada is a major producer and exporter of commodities, the prices of which have been coming on like gangbusters as of late.

Osborne said that strong commodity prices have been having a limited affect on the Canadian currency because slower U.S. and world growth are seen eventually curbing demand and lowering prices.

On the data front, Canada’s economic calendar is bare until the January gross domestic product report due on Monday. Market focus next week will be on the March jobs report due April 4.

BONDS MIXED

Canadian bond prices ended mixed as there was no data to influence direction.

“I wouldn’t read much into today’s action because we’re heading into month and quarter’s end, so most of the big portfolio managers are fine-tuning their books,” said Sheldon Dong, fixed income strategist at TD Waterhouse Private Investment.

The two-year bond rose 4 Canadian cents at C$102.72 to yield 2.573 percent. The 10-year bond shed 2 Canadian cents to C$104.20 to yield 3.460 percent.

The yield spread between the two- and 10-year bonds was 88.7 basis points, up from 84.4 points at the previous close.

The 30-year bond dropped 30 Canadian cents to C$117.62 to yield 3.974 percent. In the United States, the 30-year Treasury yielded 4.399 percent.

The three-month when-issued T-bill yielded 1.78 percent, up from 1.77 percent at the previous close. (Editing by Peter Galloway)

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