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Canadian dollar ends flat despite steady data

TORONTO: The Canadian dollar closed virtually flat on Friday as traders largely ignored steady unemployment figures for February, and instead set their sights on next week's Consumer Price Index.

The Canadian dollar closed at C$1.4583 (68.57 US cents) versus C$1.4567 at the close on Thursday.

"We traded at a very narrow, lethargic looking range today and much of the participants are trying to gauge what the Bank of Canada's new policy is going to be. The CPI report next week should shed some light," said Jeff Cheah, market strategist at Standard & Poor's MMS, in Toronto.

The CPI figures are scheduled to be released on March 15, which should give a better idea of Canada's inflation picture.

In economic news released early on Friday, Canada's unemployment rate was unchanged, as economists expected, in February at 6.8 percent despite healthy job growth, as the improving prospects of employment lured thousands back into the work force.

Statistics Canada said on Friday a 35,700 gain in jobs last month was neatly matched by a return of 37,700 people to the labour force, leaving the jobless rate unchanged as economists had predicted.

The unemployment rate has been steady since December at a 24-year low of 6.8 percent, while jobs have swelled more than 140,000 and the participation rate has climbed to 65.8 percent.

Although the Canadian dollar remained flat on Friday, Cheah does not expect it to move much until March 21 when the US Federal Open Market Committee convenes and is expected to raise interest rates by 25 basis points.

Cheah does not expect the Canadian central bank will hike short-term interest rates and follow the US Federal Reserve.

"Our view is that the Bank of Canada is not going to follow the Fed's widely anticipated rate hike this month. We think the Bank of Canada will raise rates, but the next rate hike will come in May and June, whereas our expectation for the Fed is they are going to raise rates in March, May and June," said Cheah.

"I guess the backdrop that we're going to have is a slight divergence of policy dynamics in the near term," said Cheah. That would leave the Canadian dollar more vulnerable in the near term.

In cross-trading against major currencies, the Canadian dollar was at 72.88 yen and at C$1.4041 against the euro.-Reuters