TORONTO (Reuters) - The Canadian dollar ended lower against the U.S. dollar on Friday as commodity prices fell and worries persisted about the health of the U.S. economy and the potential for spillover effects on Canada.
Canadian bond prices ended mixed, but mostly higher, as investors squared their books ahead of month’s end.
The Canadian currency closed at C$1.0215 to the U.S. dollar, or 97.90 U.S. cents, down from C$1.0184 to the U.S. dollar, or 98.19 U.S. cents, at Thursday’s close.
For the week, the Canadian dollar eked out a 0.002 percent gain.
The currency has been unable to attract the attention of buyers, despite robust prices for commodities, which make up roughly half of Canadian exports. Commodity prices were lower on Friday, but remained near recent record highs.
The range-bound Canadian dollar has been shackled by fears that a deep U.S. downturn could hurt demand for commodities and derail Canada’s economic growth.
BMO Capital Markets pointed out in a note to clients that according to the IMF, each percentage point decline in U.S. growth reduces Canadian GDP by one-half to three-quarters of a percent due to weaker exports and lesser funding, as Americans provide about one-quarter of the capital raised by Canadian corporations.
Canadian exports in the fourth quarter plunged the most since the 2001 U.S. downturn.
With the Canadian dollar sticking stubbornly around parity with the greenback, and U.S. demand evaporating, trade will remain a heavy anchor on growth this year, the note said.
The United States takes over 75 percent of Canadian exports.
Looking ahead to next week, January’s Canadian gross domestic product report on Monday and March jobs reports in Canada and the United States on Friday have the potential to push the Canadian dollar out of its recent range, said George Davis, chief technical strategist at RBC Capital Markets..
“On Monday we’ve got GDP and that should be fairly significant given the context of the slowdown in the U.S.”
“I think to a certain extent, a lot of the key numbers we’ve seen here in Canada have shown a much more resilient economy north of the border, so that number will be relevant in that context.”
Bond prices ended the session mixed as investors squared their books heading into month’s end and ahead of next week’s data.
The lack of data led to a quiet session, but next week, the GDP and employment reports, should shake things up, said Max Clarke, economist at IDEAglobal in New York.
“What most people will be looking for will be the employment data, particularly the U.S. number and I think people are setting up for that.”
The two-year bond dipped 1 Canadian cent to C$102.70 to yield 2.580 percent. The 10-year bond rose 10 Canadian cents to C$104.28 to yield 3.450 percent.
The yield spread between the two- and 10-year bonds was 87.0 basis points, down from 88.7 points at the previous close.
The 30-year bond was up 32 Canadian cents at C$117.95 to yield 3.954 percent. In the United States, the 30-year Treasury yielded 4.313 percent.
The three-month when-issued T-bill yielded 1.90 percent, up from 1.78 percent at the previous close.