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Canada dollar on soft US CPI, firmer commodities

TORONTO: The Canadian dollar ended slightly higher on Friday, with soft US inflation data and firmer commodity prices cited as positives for the currency.

But the Canadian unit failed to make substantial gains despite the supporting factors, and remains essentially range-bound, some market watchers said.

The Canadian dollar closed at C$1.4492 (69.00 US cents) on Friday, from Thursday's C$1.4503 (68.95 US cents) close.

The Canadian unit was bolstered in early trading by buying against the euro, said one Toronto currency trader with a major Canadian bank.

News that the US consumer price index rose by 0.2 percent in December, while the core inflation index, which excludes food and energy, edged up only 0.1 percent, provided a further boost, he added.

Canadian dollar buying on the International Monetary Market helped generate more momentum for the currency, he said. "People jumped on the bandwagon down in Chicago, started buying more Canada," the trader said.

The Canadian dollar then collided with resistance around C$1.4450 (69.20 US cents), and started slipping lower, the trader said.

"The smarter investors, especially in the US, who had been long Canada all week, started squaring up or selling down their positions, selling Canada quite aggressively," he said.

"Still, smart money wants to buy Canada dollar on US rallies," the trader said.

After tapering off to the C$1.4500 area in late morning trading, the Canadian dollar retraced some of its losses.

Trading in the currency was heavy on Friday, the trader added.

Marcel Kasumovich, associate economist with Goldman Sachs Canada, said stronger commodity prices played a pivotal role in the Canadian dollar's generally improved tone.

"I think even perhaps more important than the economic numbers per se, was the rebound in not only oil, but non-oil commodity prices that we have seen," he said. The Goldman Sachs non-energy commodity price index was testing 10-month highs on Friday, he said.

"The US stats had a short-lived impact on the market, and then commodity story sort of took hold," Kasumovich said.

In cross-trading against major currencies, the Canadian dollar was at 73.93 yen and at C$1.4679 against the euro .The Canadian dollar was at A$1.0350 against the Australian dollar.-Reuters