Tuesday April 8, 2008 - 22:43:56 GMT
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Reuters - www.reuters.com
Forex Market News - Canadian dollar tilts lower, housing data ignored
By Frank Pingue
TORONTO (Reuters) - The Canadian dollar ended flat versus
the U.S. dollar on Tuesday in a lackluster session during which
economic data that showed March housing starts beat estimates
had little impact on investor sentiment.
Canadian bond prices rose on the short end of the curve but
trickled lower on the long end after minutes from the U.S.
Federal Reserve's latest meeting stoked fears about a
The Canadian dollar closed at C$1.0140 to the U.S. dollar,
or 98.62 U.S. cents, down from C$1.0133 to the U.S. dollar, or
98.69 U.S. cents, at Monday's close.
The currency spent the session in a rather tight range of
C$1.0160 to the U.S. dollar, or 98.43 U.S. cents, and C$1.0122
to the U.S. dollar, or 98.79 U.S. cents.
Data released early in the session showed housing starts in
Canada fell less than the market had expected. And while that
offered some proof of a resilient Canadian economy, it did
little to spark a move in the Canadian dollar.
Instead, investors tried to gauge whether the worst of the
latest financial market turmoil has passed, or whether further
fallout from the U.S. economic slowdown lies ahead.
"The market is pausing here to get a sense of whether the
slightly better tone in financial markets is indicative of the
concerns easing in terms of the credit crunch or whether it's
once more a false bottom," said Paul Ferley, assistant chief
economist at BMO Capital Markets.
"So basically the market is trying to get a firmer sense in
terms of the likely direction of both the economy and financial
Nagging concerns about what damage the U.S. economic
downturn could have on Canada have kept the Canadian currency
wedged in a rather tight range for months despite some upbeat
economic figures and some robust prices for the energy and
other commodities that Canada produces.
Canadian bond prices were given a boost on the short end of
the curve after release of the latest minutes from the Fed,
which showed a forecast for a contraction in the economy during
the first half of the year as inflation increases.
"Certainly the Fed minutes provide reasons for caution here
in the near term with the Fed indicating it is still concerned
about weakness in the first half of the year and a likely
decline in economic activity," Ferley said.
"The comments by the Fed indicate, near term, the
possibility of some bad news playing out, but possibly the
longer end indicating some optimism that maybe the worst in
terms of the concerns about credit quality has passed."
The two-year bond rose 6 Canadian cents to C$102.02 to
yield 2.772 percent. The 10-year bond dropped 16 Canadian cents
to C$102.97 to yield 3.615 percent.
The yield spread between the two- and 10-year bonds was
84.3 basis points, up from 80.6 at the previous close.
The 30-year bond fell 72 Canadian cents to C$115.40 to
yield 4.090 percent. In the United States, the 30-year treasury
yielded 4.387 percent.
The three-month when-issued T-bill yielded 2.19 percent, up
from 2.16 percent at the previous close.
(Reporting by Frank Pingue; Editing by Peter Galloway)
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