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Canadian dollar

closes easier

TORONTO: The Canadian dollar closed soft on Monday and dealers warned a weakening trend seems about to establish itself.

Political uncertainty due to the upcoming referendum on Quebec separation from Canada this fall was blamed for most of weakness, although dealers said narrowing Canada-U.S. bond yield spreads also contributed to the easy trend.

The Canadian currency fell a bond dealers unwound positions, particularly in 10-year issues. The Canadian dollar closed at C$1.3615 (US$0.7345) compared to Friday's close of C$1.3610 (US$0.7347).

Dealers and analysts warned that the political uncertainty that hurt today's market is expected to intensify over the coming weeks as the referendum campaign gets underway.

Dealers forecast substantial weakness over the coming two months, with some expecting to see the unit fall to C$1.40 against the U.S. dollar before the final vote is cast.

Continuing firmness in the U.S. dollar against the German mark and Japanese yen failed to provide much support to the Canadian dollar, dealers said.

On the crosses, the Canadian dollar fell to 1.0555 marks from 1.0590 marks at Friday's close and dropped to 68.81 yen from 69.03 yen.-Reuter