C$ firms, bouncing from last week’s losses
February 24, 2014
By Leah Schnurr
The Canadian dollar firmed against the greenback on Monday, stabilizing after recent losses and as this week’s light economic calendar left the loonie with few near-term catalysts.
Investors were taking in comments from Bank of Canada Governor Stephen Poloz made over the weekend that two months of stronger domestic inflation has made the central bank feel a little more comfortable.
Data on Friday showed Canada’s annual inflation rate jumped to its highest level in 1-1/2 years in January. At its most recent meeting last month, the Bank of Canada said it had become more concerned about weak inflation. Still, Poloz’s comments did not appear to have much impact on the loonie in early Monday trade.
The Canadian dollar was benefiting from a slight improvement in risk appetite in the markets, said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.
“With the absence of domestic data until really Friday, we’ll be in a bit of a consolidative pattern. I could see the loonie gaining a little bit of strength after that sharp sell-off we saw earlier last week,” said Smith.
The Canadian dollar was at C$1.1075 to the greenback, or 90.29 U.S. cents, stronger than Friday’s close of C$1.1133, or 89.82 U.S. cents.
If the currency pair continues to consolidate, the Canadian dollar could firm to as far as about C$1.1020, while any declines should be capped in the low C$1.11 area over the next day or two, said Smith.
The loonie tumbled last week, interrupting February’s run higher after the currency hit a 4-1/2-year low at the end of January. The U.S. dollar appreciated by about 1 percent against the loonie last week.
Investors will have to wait until Thursday’s current account figures before they get any Canadian economic data. But Friday will be the main focus when fourth-quarter gross domestic product will be released. Growth is expected to slip to an annualized 2.5 percent.
Canadian government bond prices were lower across the maturity curve, with the two-year down 3-1/2 Canadian cents to yield 1.030 percent and the benchmark 10-year down 8-1/2 Canadian cents to yield 2.528 percent.