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Canadian dollar ends up moderately as stocks tumble

TORONTO: The Canadian dollar closed moderately higher on Thursday even as technology stocks tumbled and interest in the currency at the International Money Market in Chicago waned.

The Canadian dollar was at C$1.4553 (68.71 US cents) on Thursday at the close versus C$1.4574 (68.62 US cents) at the previous session's close.

"The dollar is doing okay, despite a massive sell-off in equity markets," said Bill Mooney, chief foreign exchange dealer at Societe Generale in Montreal.

The Toronto Stock Exchange's key 300 index closed 308.16 points lower at 9394.0 on Thursday as a rout in the high technology sector continued. Some market watchers said weakness in equity markets stemming from the recent sharp correction in technology stocks could create broader financial market turbulence, and that could pressure the Canadian dollar.

"The Canadian dollar's fortunes haven't really been driven by the attention of (Canadian) tech stocks, although its equity markets have been very tech-stock driven," said Avery Shenfeld, senior economist at CIBC World Markets. "But Canada has actually been investing more in foreign equities than we have been drawing in, so that in itself shouldn't be a negative for the currency."

Mooney said early Canada-yen selling brought the Canadian unit to its weakest ranges of the day. As well, a quiet opening on the International Money Market meant interest in the currency at the Chicago-based futures market was waning compared with earlier this week, putting some pressure on the Canadian unit.

"There was some corporate activity, in particular a couple of large transactions had the Canadian dollar weakening and we initially had some of the IMM players try to put on short Canada positions," said Shenfeld. "But the Canadian dollar showed no tendency to extend that earlier weakness, and as it came back the IMM players have closed off those short Canada positions," said Shenfeld.

In domestic economic news, strong February figures for industrial product price index and raw materials price index failed to affect the Canadian dollar. Canadian January GDP figures, to be released on Friday, could push it up a bit.

"I think we could get a little bit of a boost from that. But, I don't think it's going to alter the general expectation that the Bank of Canada is in a position to match the (US Federal Reserve) on the next rate hike, so it's not going to be a barn burner for the currency," said Shenfeld.

Some analysts said the Canadian dollar may pick up some bullish momentum as market players begin to entertain the idea that the Canadian central bank will follow the Fed's hawkish tracks. In the meantime, the Canadian unit will likely remain fairly range-bound.

"I think we are very much mired in a range. There are no major economic fundamentals that are going to take the Canadian dollar stronger, but the Bank of Canada's tolerance for a very weak Canadian dollar is very limited," said Shenfeld.

In cross-trading against major currencies, the Canadian dollar was at 72.39 yen compared with 72.51 yen at the previous session's close and at C$1.3976 against the euro versus C$1.3862. The Canadian dollar was at A$1.1198 against the Australian dollar versus A$1.1213 at the previous close. -Reuters