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Canada dollar ends up, but stays confined to range

TORONTO: The Canadian dollar ended moderately higher on Tuesday, but remained well within recent ranges as traders continued to display a "ho-hum" response to the federal budget unveiled late on Monday.

The Canadian dollar closed at C$1.4496 (68.98 US cents) on Tuesday after closing at C$1.4512 (68.91 US cents) in the previous session.

While Finance Minister Paul Martin's budget was widely regarded as stimulative, it likely won't induce the kind of inflationary pressure that would prompt a tigher monetary policy stance from the Bank of Canada, said Avery Shenfeld, senior economist at CIBC World Markets.

"I think the market's got it right, in the sense that although the budget is stimulative, it's not any more stimulative than the past couple of budgets, so there's no reason to expect the Bank of Canada to ramp up its tightening course, and that's why I think the currency has 'ho-hummed' this," he said.

The Canadian dollar will remain caught in recent trading ranges unless fresh new incentives emerge to lure market players back into the currency, he added.

"I think the speculators had taken it strong, it lost momentum, and at this point they haven't decided to return," Shenfeld said.

"I think the commodities story is probably now looking a bit tired, particularly with the other commodities currency, the Aussie dollar, doing poorly, and I think that leaves investors looking for some other reasons to hold Canada," he said.

In cross-trading against major currencies, the Canadian dollar was at 75.98 yen and at C$1.3968 against the euro. The Canadian dollar was at A$1.1141 against the Australian dollar.-Reuters