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Canada dollar up slightly, seen stronger next week

TORONTO: The Canadian dollar ended slightly higher in quiet trading on Friday after a number of developments earlier in the week eased concerns about diverging interest-rate scenarios in Canada and the US.

The Canadian dollar closed at C$1.4507 (68.93 US cents) on Friday after closing at C$1.4510 (68.92 US cents) in the previous session.

"The numbers were somewhat lighter today and yesterday on the inflation front in the US," said one Toronto currency trader

News that the US consumer price index rose by a weaker-than-expected 0.2 percent on Friday followed benign producer price index data on Thursday.

While Fed Chairman Alan Greenspan's Humphrey-Hawkins testimony on Thursday was viewed by some commentators as hawkish, a monetary policy update by Bank of Canada Governor Gordon Thiessen on Wednesday helped offset that by suggesting the Canadian central bank is also prepared to take an aggressive stand on rates.

"There were also indications that the Bank of Canada will match the Fed's hike, so the worry of widening interest-rate differentials is not going to be there," the trader said.

"It looks like Canada is going to do a little bit better next week," he said, adding that the currency could appreciate to the C$1.4400 to C$1.4350 area.

News that Canada's trade surplus dipped to C$2.74 billion in December from a revised C$3.21 billion the previous month -- disappointing expectations of a C$3.2 billion surplus -- failed to have much immediate impact on the currency.

"I think it's still very much a sideways moving currency. We got through most of the big information in terms of the central banks and so on, and I think we're just waiting for large transactions to move it one way or another, a big merger or that sort of thing," Avery Shenfeld, senior economist at CIBC World Markets Inc.

"In the meantime, the fundamentals seem to argue for the status quo for the currency," he added.

An early close on the International Monetary Market in Chicago in advance of Monday's Presidents' Day holiday in the United States helped curtail trading in the Canadian currency on Friday afternoon, the trader said.

In cross-trading against major currencies, the Canadian dollar was at 76.42 yen CADX and at C$1.4313 against the euro. The Canadian dollar was at A$1.0938 against the Australian dollar.-Reuters