20000331

Canada dollar ends a bit weaker as trading slows

TORONTO: The Canadian dollar closed slightly weaker on Wednesday as trading slowed considerably by mid afternoon after volatile trading at the opening of the International Money Market in Chicago.

The Canadian dollar was at C$1.4574 (68.62 US cents) on Wednesday, versus C$1.4540 (68.78 US cents) at the previous session's close.

"(It was) a weird day on the currency, I find, a little bit of morning volatility, then it basically calmed down quite a bit," said Steve Demers, director of foreign exchange at National Bank in Montreal.

He attributes some of the volatility to the IMM.

"Not as much aggressive Canadian dollar buying out of the pits in Chicago on the futures side, where yesterday speculators were very active in buying Canadian dollars, but more quiet today," Demers said.

The quiet opening on the IMM on Wednesday meant the action on the Chicago-based currency futures markets failed to move the Canadian unit as it had over the past few days. A Chicago hedge fund's interest in the Canadian currency had helped it strengthen against its US counterpart over the past few sessions, some analysts said.

Range trading is the name of the game, market watchers said.

"It looks like the Canadian dollar wants to establish itself in a range," Demers said. "For the short term, maybe the forecast is for a move back up towards the high end of this range."

He said the currency will likely range from around C$1.4400 to C$1.4700.

"I think we're getting confirmation once again that there's good interest in buying some US dollars at the low C$1.4500. It looks like the market is building some good support down there," he said.

Minutes from a meeting of the Bank of Canada's board of directors in early February released on Wednesday showed that bank officials believe the Canadian dollar's marked strength earlier this year was due to a variety of factors.

"Continued improvement in commodity prices, the strong performance of the Canadian economy and, late in the period, market expectations that the Bank of Canada would match an interest rate hike by the (US Federal Reserve), had been the main factors supporting the currency," the minutes said.

In cross-trading against major currencies, the Canadian dollar was at 72.51 yen CADX compared with 72.76 yen at the previous session's close and at C$1.3862 against the euro versus C$1.3962. The Canadian dollar was at A$1.1213 against the Australian dollar compared with A$1.1170.-Reuters