20000325

Canada dollar ends down after volatile session

TORONTO: The Canadian dollar closed slightly lower on Thursday after a day of choppy, volatile trading.

The Canadian dollar closed at C$1.4702 (68.02 US cents) on Thursday versus C$1.4695 (68.05 US cents) at the previous session's close.

"It's been a very active day, we've had some good two-way flows and real volume today. You get that with 10,000 on the TSE, I guess," said Jack Spitz, regional manager of foreign exchange with the National Bank of Canada in Toronto.

The Toronto Stock Exchange's benchmark index surged through the 10,000-point mark for the first time on Thursday, only weeks after passing the 9000-point milestone.

The Canadian dollar suffered a fairly sharp slide in the morning, weakening to C$1.4750. The market temporarily shifted its attention towards the possibility of getting to C$1.4800, but the US dollar began to weaken as Canadian equities strengthened, said Andrew Pyle, vice-president and senior financial markets economist at Scotiabank.

"On that note, the technical tone of the currency has again deteriorated as it did last week. But we've seen the currency come back again back to C$1.4700, really on the back of improved equity performance with the TSE hitting 10,000," Pyle said.

Traders were divided on whether the Sun Life initial public stock offering had any impact on the Canadian currency this morning. Sun Life Financial Services Inc. early on Thursday revealed a low-end price for its initial public offering, as the last major Canadian insurance firm converted itself to a publicly traded entity.

Market watchers attributed some weakness in the dollar to the uncertainty in Canadian politics.

"The markets are very much desirous of (Paul Martin) staying and staying in his position as minister of finance. If he threatens to quit or if he does quit, it's going to be unsettling for the Canadian dollar. That kind of uncertainty doesn't bode well for the Canada," said Spitz.

Tension in Canada's ruling Liberal Party has intensified over the past week with rumours saying Martin will quit if Prime Minister Jean Chretien does not step aside so that Martin can succeed him.

In economic news, Canadian retail sales were unchanged in January after an upwardly revised 2.1 percent rise in December.

"We had fairly weak retail sales numbers for Canada, which didn't help at a time when the currency was already coming under pressure," said Pyle.

While the Canadian dollar could weaken further, some market watchers said its has the potential to appreciate over the longer term.

"We think Canada's going to trade probably back to C$1.4750 before the end of the week," said Spitz.

"I like Canada and I think over the longer term Canada should rally but right now we're seeing some volatility and it's probably going to push Canada a little bit weaker," he added.

In cross-trading against major currencies, the Canadian dollar was at 73.02 yen and at C$1.4275 against the euro. The Canadian dollar was at A$1.1225 against the Australian dollar.-Reuters