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Canada dollar slips lower, trades in narrow range

TORONTO: The Canadian dollar ended slightly lower on Tuesday after a session of thin, range-bound trading, market watchers said.

The currency weakened off in early trading in a move some analysts linked to cross selling against the yen and the Australian dollar, dipping to the C$1.4585 level in the morning.

It then retraced some of its early losses and spent most of the session in a narrow band around the C$1.4570 level. The currency closed at C$1.4572 on Tuesday, from Monday's C$1.4555 close.

But trading remained thin as the last, lingering effects of pre-Y2K caution worked their way out of the system, said Tom Benfer, director of foreign exchange with the Bank of Montreal in New York.

Many corporate market players avoided forward contracts that expired in the first two weeks of the year, and that has helped keep trading relatively subdued, he added.

"We warned them not to deal in the first two weeks of the year, and now they've done what we said," he said. "We haven't done much Canadian today at all."

Traders reported heavier trading in the currency during the European session.

News that Canadian housing starts increased marginally in December to 155,400 from a revised total of 155,000 in November, had no real impact on the Canadian currency, traders said.

Many market players remain confident that the Canadian dollar is poised to improve on a longer-term basis, a trader said.

"I think the overall market sentiment is still starting the year as being bullish, but they're just a little hesitant about putting on positions at these levels, so you're going to see guys waiting," the trader said.

Some market watchers said investors were being cautious about embracing the Canadian currency too much before concerns about interest rates in the US are resolved.

Lower prices for agricultural commodities were hampering the Canadian currency somewhat, Benfer said.

The currency was expected to improve in coming weeks as it is swept up by the strength of the US economy, he said.

"I think overall, it's going to be benefiting alongside the US - the US economy just continues to grow," he said.

In cross-trading against major currencies, the Canadian dollar was at 72.72 yen and at C$1.5057 against the euro EURX. The Canadian dollar was at A$1.0417 against the Australian dollar .-Reuters