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Canada dollar ends flat, consolidation cited

TORONTO: The Canadian dollar closed flat against the US dollar on Monday after a day of range trading in which market participants watched the US equity markets closely.

The Canadian dollar was at C$1.4506 (68.94 US cents) on Monday versus C$1.4494 (68.99 US cents) at the previous session's close.

US technology stocks slumped on Monday, driving the Nasdaq market down by a record 349.15 points -- or 8 percent -- as the failure of Microsoft Corp's antitrust case settlement talks with the government exacerbated fears that computer and Internet-related issues are wildly overvalued.

"The biggest factor if you look south of the border is the equity markets over there. The old economy stocks are doing relatively well, but all that is Nasdaq is off (8 percent)," said Steve Demers, director of foreign exchange at National Bank in Montreal.

"I think that's significant because everyone knows that if the US economy slows, if the US equity markets moves down, it would provoke some weakness in the US dollar. In turn, (it will) probably bring some foreign investors to pull some money out of Canada, so it would be negative for the currency. I think that's the main reason why Canada did not appreciate some more today," he added.

Demers described trading today as mostly range-bound and quiet while the currency corrects a little.

"I think with the strong appreciation of the Canadian dollar last week, it's a little bit normal that we have a day or two of consolidation, maybe a small correction," said Demers.

He was somewhat surprised that the Canadian dollar has been generally doing well against its Australian counterpart, although it was down a bit on Monday. The two currencies, seen by market players as moving in concert, have not been doing so recently. The Canadian dollar has held relatively steady against the Australian unit in the last year. "It is very difficult to see how the Canadian dollar can do well in that environment because these two currencies usually move in tandem," he said.

Trading in the Canadian dollar was driven by technical factors, and there was no significant economic news to influence the currency, market watchers said.

It may be affected by March employment figures due this Friday for both Canada and the US The numbers could provide an early signal of inflation and a guide to the direction of interest rates, analysts said.

News that Japanese Prime Minister Keizo Obuchi was in a coma on Monday following a stroke did not affect the Canadian dollar.

In cross-trading against major currencies, the Canadian dollar was at 72.32 yen compared with 70.84 yen at the previous session's close and at C$1.3879 against the euro EU versus C$1.3843. The Canadian dollar was at A$1.1330 against the Australian dollar versus A$1.1343. -Reuters