By Frank Pingue
TORONTO (Reuters) - The Canadian dollar ended flat against the greenback on Thursday but moved comfortably off a session low as domestic data topped estimates and the Bank of Canada said the currency returned to a more suitable range.
Domestic bond prices were pinned lower as building permits data topped expectations, equity markets rallied and dealers positioned themselves ahead of key jobs data due on Friday.
The Canadian dollar closed at 98.49 U.S. cents, valuing a U.S. dollar at C$1.0153, unchanged from Wednesday's close.
Despite the flat close, the Canadian dollar rallied sharply from a session low of 98.08 U.S. cents, or C$1.0195, due mostly to strong Canadian economic data and Bank of Canada Governor David Dodge's comments that the dollar was back in a comfortable range for the country's economy.
"We've had a lot of central bank and finance minister speak about the worries over the currency and how far it's gone and today Dodge came out and said it's back to where we thought it should be," David Watt, senior currency strategist at RBC Capital Markets, said. "That certainly gave the market a sigh of relief and I think it's reflective in the price action today."
Dodge, speaking to a Senate banking committee, said the fall in the Canadian dollar since hitting a modern-day high of US$1.1039 on November 7 has put it back in a range the bank thought made sense in its economic forecasts.
Those comments, along with better-than-expected readings on Canadian building permits and Ivey Purchasing Managers Index helped the currency make up for losses suffered on Wednesday when it hit its lowest level since September 18.
Since its November peak, the Canadian dollar has been hit with a combination of lower commodity prices, several pieces of weak domestic data and a Bank of Canada rate cut.
The Canadian dollar is still faces the key U.S. and Canadian jobs data due on Friday and the U.S. Federal Reserve interest rate decision next week.
"It's too soon to say that we've seen the worst for Canada on this correction and a lot will be depend on what we get out of the numbers tomorrow," Watt said.
Canadian bond prices ended down as data released early in the session showed domestic building permits rose 6.8 percent in October while purchasing activity in the Canadian economy rose in November.
Both data pieces topped estimates and weighed on bond prices, as did another North American equity market rally.
Friday's jobs data, expected to show the domestic economy added 10,000 jobs in November, according to a Reuters survey, will likely dictate where bond prices go next.
The two-year bond slid 14 Canadian cents to C$101.18 to yield 3.626 percent. The 10-year bond declined 29 Canadian cents to C$100.25 to yield 3.969 percent.
The yield spread between the two-year and 10-year bond moved to 34.3 basis points from 38.0 at the previous close.
The 30-year bond dropped 8 Canadian cents to C$114.41 to yield 4.148 percent. In the United States, the 30-year treasury yielded 4.479 percent.
The three-month when-issued T-bill yielded 3.87 percent, up from 3.84 percent at the previous close.
(Editing by Jeffrey Jones)