Friday April 25, 2008 - 23:54:32 GMT
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Reuters - www.reuters.com
Forex Market News - Dollar ends losing week with minor fall
Fri Apr 25, 2008 5:51pm EDT
By Frank Pingue
TORONTO (Reuters) - The Canadian dollar closed slightly
lower versus the U.S. dollar on Friday in a lackluster session
that capped a losing week in which weak retail sales data and a
Bank of Canada rate cut rattled the currency.
Bond prices, with no Canadian data to consider on Friday,
finished lower across the curve as dealers curtailed bets on
further rate cuts by the U.S. Federal Reserve.
The Canadian dollar closed at C$1.0163 to the U.S. dollar,
or 98.40 U.S. cents, down from C$1.0142 to the U.S. dollar, or
98.60 U.S. cents, at Thursday's close.
It marked a quiet end to a week in which the Canadian
dollar shed 1.1 percent after sliding in four of the five
The bulk of the Canadian dollar's fall came after a report
on Wednesday that showed an unexpected drop in Canadian retail
sales for February.
The commodity-linked currency had little reaction to the
surge in oil prices to a record high near $120 a barrel, a key
reason it has been unable to break out of the tight range it
has been wedged in for all of 2008.
"And I think that speaks volumes about which way the market
is headed," said Doug Porter, deputy chief economist at BMO
Capital Markets. "It just takes a lot of good news to drive the
currency higher from current levels and not much at all to
knock it down."
In the latest session, the Canadian dollar stuck to a range
of C$1.0121 to the U.S. dollar, or 98.81 U.S. cents, and
C$1.0189 to the U.S. dollar, or 98.15 U.S. cents.
Another drag on the Canadian currency this week, though a
more minor one, was a widely expected 50-basis-point interest
rate cut from the Bank of Canada and its signal that at least
one more rate cut lies ahead.
Data due next week that will grab the market's attention
includes the February gross domestic product report due on
Wednesday along with industrial product price and raw materials
price indexes for March.
BONDS PINNED LOWER
Canadian bond prices dropped on a one-two punch of renewed
worries over rising global price pressures and talk that the
Fed's aggressive rate-cut campaign may soon be over.
Data from Japan showed annual inflation hit a decade high
of 1.2 percent in March on soaring energy costs, which rattled
bonds on overseas markets and eventually in North America.
The Fed has slashed its borrowing costs by 3 percentage
points since September due to the credit crisis that erupted
last year, and some experts feel it will soon step to the
sidelines to see if the rate reductions have their intended
"Just a general sense that the Fed is nearing the end of
the easing cycle," said Porter. "So we just capped off two
weeks of heavy-duty selling on Treasuries and it partly spilled
over into Canada as there is a general sense that maybe the
worst is over on the credit crisis front."
The two-year bond fell 10 Canadian cents to C$101.66 to
yield 2.925 percent. The 10-year bond dipped 30 Canadian cents
to C$101.85 to yield 3.757 percent.
The yield spread between the two- and 10-year bonds was
83.2 basis points, down from 84.5 basis points at the previous
The 30-year bond shed 38 Canadian cents to C$113.08 to
yield 4.215 percent. In the United States, the 30-year Treasury
yielded 4.593 percent.
The three-month when-issued T-bill yielded 2.60 percent, up
from 2.57 percent at the previous close.
(Editing by Peter Galloway)
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