Tuesday, May 6, 2008

Canada Morning: C$ Up On Strong Data, Higher Oil Prices

TORONTO (Dow Jones)--The Canadian dollar is higher early Tuesday, having at least momentarily broken with its earlier pattern of light, narrow range trading on a better-than-expected outcome for Canada's April Ivey Purchasing Managers' Index of manufacturing activity. The U.S. dollar was trading at C$1.0065 at 10:18 a.m. EDT (1418 GMT), from C$1.0118 at 8:00 a.m. EDT (1200 GMT) and C$1.0137 late Monday. The Ivey survey of purchasing managers achieved a reading of 57.6 in April, beating consensus estimates and causing the Canadian dollar to spike from the C$1.0140 area past the C$1.0100 figure. Prior to that, the currency had been locked in fairly tight dealings in the mid-C$1.0100s, as it consolidated Monday's improvement on the back of soaring world oil prices. High oil prices are seen continuing to lend some support to the Canadian dollar, though the offsets of high oil including a renewed downdraft on the U.S. dollar and shakier equity markets are also having some restraining effects on potential gains for the Canadian currency. While higher oil prices benefit Canada as a net oil exporter, fears that these higher prices could further erode U.S. and by extension Canadian economic performance have a somewhat countervailing impact on the Canadian dollar in the current environment. Most currency watchers believe that these competing influences will continue to limit potential movements for the Canadian dollar until at least Friday, when some fresh fundamental trading incentives emerge in the form of Canada's April employment and March merchandise trade reports. "Any gains for the Canadian dollar on the back of stronger crude oil prices are likely to be mitigated by position-squaring ahead of the Friday's dual releases," said Jack Spitz, director of foreign exchange at National Bank in Toronto. "For the moment, it's better bid, but the reaction is ultimately likely to be muted." Canadian bonds are slightly higher in light trading early Tuesday, with the benchmark 10-year bond yielding 3.58% from 3.62% late Monday. These are the exchange rates at 10:18 a.m. EDT (1418 GMT), 8:00 a.m. EDT (1200 GMT), and late Monday.
USD/CAD 1.0065 1.0118 1.0137
EUR/CAD 1.5682 1.5724 1.5707
CAD/JPY 103.57 103.19 103.43

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