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Canada dollar ends down, further weakness foreseen

TORONTO: The Canadian dollar ended down on Monday after being buffeted by turbulent equity markets early in the day and then failing to make a significant comeback even as stock market losses eased.

With significant economic data looming later in the week and the US Federal Reserve scheduled to hold its policy-setting open market committee meeting on April 21, the currency is likely to continue to slide lower, some market watchers said.

The Canadian dollar closed at C$1.4622 (68.39 US cents) versus C$1.4583 (68.57 US cents) at the previous session's close.

Most of the pressure on the Canadian unit came early in the day as North American stock markets plunged.

But the currency met with support around the C$1.4600 level as a large US dollar sell order surfaced, one Toronto currency trader said.

"There were some pretty hefty US dollar sell orders around the (C$1.4600) figure level," the trader said.

Although the currency's decline was contained, it failed to recover much as stock market losses eased significantly later in the day.

Other negatives for the currency in coming sessions include repatriation flows preceding the Japanese year end on March 31 and the impending Fed policy meeting in the United States, the trader said.

"Really, heading into the FOMC next week, Canada's going to come under pressure over the balance of the week," he said.

Efforts to protect options with strike prices at the C$1.4650 level may also prevent the Canadian currency from deteriorating too abruptly in coming sessions, he added.

"Technically, there's definitely support at the C$1.4650 to C$1.4660 level for Canada, but I think it will get tested, and might get taken out at some point this week," the trader said.

Sal Guatieri, senior economist at the Bank of Montreal, said there weren't any economic fundamentals that would explain the sagging Canadian dollar on Monday.

"I don't see any fundamental reason why it would weaken," he said.

"We've been kind of scratching our heads for the last few weeks as to why the Canadian dollar has weakened off," Guatieri said.

While the currency has seemed biased to weaken in recent sessions, it is essentially just trading to the weak side of its recent range, he added.

Data releases that could affect the currency later in the week include US retail producer prices on Thursday, consumer prices on Friday, and Canadian consumer price data on Wednesday.

In cross-trading against major currencies, the Canadian dollar was at 72.24 yen and at C$1.4085 against the euro. The Canadian dollar was at A$1.1087 against the Australian dollar. -Reuters