20000121

Canada dollar ends down, heavy two-way trading seen

TORONTO: The Canadian dollar ended lower on Wednesday, but bounced off the bottom of its recent ranges in heavy, two-way trading, market sources said.

"There's been pretty active two-way business. I'd call it heavy trading on both sides of it," said Reid Farrill, executive director of foreign exchange at CIBC World Markets.

The Canadian dollar ended at C$1.4517 (68.88 US cents) on Wednesday from Tuesday's C$1.4499 (68.97 U.S cents) close.

The currency slumped in North American trading, briefly breaching the C$1.4520 level that had been cited by many traders as significant support for the Canadian unit.

It recovered somewhat and stabilised around that level, instead of dropping lower as some expected, and ranged between the C$1.4500 and C$1.4520 areas for the rest of the session.

"There's really two sides to this market. There are those who are looking at the hot US economy, feeling that the Fed has 75 basis points in it over the first half of the year. That group feels relatively bullish about the US dollar," Farrill said.

Arrayed against them are market players focusing on stronger commodity prices and the healthy resource sector who see support for the Canadian currency there, and technical traders who expect the currency to appreciate further, he added.

"Those are really the two competing groups, and they were battling back and forth today," he said.

"I think the wild card in all this is all the corporate financing activity that's out there and flows related to that," Farrill added.

Rick Egelton, deputy chief economist at the Bank of Montreal, said the release of Canadian merchandise trade data for November on Thursday may be positive for the currency.

Statistics Canada reported on Wednesday that manufacturing shipments increased by 1.8 percent in November -- exceeding the expected 1.5 percent climb -- while unfilled orders declined by 0.4 percent.

"The manufacturing shipment numbers were quite positive this morning, so I'm just a tad surprised that that didn't have a more positive impact on the currency," said Egelton, adding that the strong showing in shipments suggests a robust trade performance.

In cross-trading against major currencies, the Canadian dollar was at 72.52 yen and at C$1.4692 against the euro. The Canadian dollar was at A$1.03374 against the Australian dollar.-Reuters