Published: Fri, 03 Apr 2009 17:52:19 +0200

Canadian Dollar Moves Higher Despite Weaker Equities

(CEP News) - Weaker North American equity markets are having little impact on the Canadian dollar as it makes gains against the greenback.

According to some currency strategists, there appears to be some renewed interest in the Canadian dollar Friday morning as the loonie jumps from the third worst currency on the day to the third best.

The U.S. jobs report for March is not providing much direction for currency markets. The U.S. economy shed 663,000 jobs in March and the unemployment rate rose four-tenths to 8.5%. Both numbers were in line with expectations.

USD/CAD has traded in a fairly tight channel Friday. During the Asian session, the cross hit daily lows at 1.2378 CAD, but managed to recover following the employment data, hitting highs at 1.2456.

"I think we are in a holding pattern for today and I don't think we are going to see any major moves," said George Davis, chief technical analyst at RBC Dominion Securities. "However I think there are some risks to the downside (for USD/CAD). There appears to be some selling interest at the 1.24 area."

Davis said the recent rally in the Canadian dollar could be related to some interbank buying in the market. He said the Canadian dollar is also stronger against some of the other currencies, such as the euro and sterling.

C.J. Gavsie, managing director of FX products at BMO Capital Markets, said that in the longer term, he sees more potential for the Canadian dollar, but that any sustained rally will have to coincide with a broad rally in equities and oil.

However, with USD/CAD stuck in a broad range, Gavsie said there is a risk in the short term that the cross will move higher to 1.27 CAD. He is expecting the cross to continue to bounce between support at 1.18 CAD and resistance at 1.30 CAD.

"I don't think you can rule out a move back to 1.27 but our position is that we would prefer to sell at that level," he said.

Euro/USD down 0.16 cents to 1.3446

USD/CAD down 0.39 cents to 1.2334

USD/Yen up 0.32 points to 99.85

GBP/USD up 0.83 cents to 1.4807

AUD/USD down 0.50 cents to 0.7101

Euro/Yen up 0.28 points to 134.25

Euro/GBP down 0.62 pence to 0.9081

GBP/CAD up 0.43 cents to 1.8259

CAD/Yen up 0.53 points to 80.97

Euro/CAD down 0.71 cents to 1.6581

The U.S. Dollar Index is down 0.06 points to 84.39

All data taken at 11:45 a.m. EDT.

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca