The Canadian dollar remains mired at a three-month low as the market continues to push it toward key technical levels.

"The abrupt turn-around in the Canadian currency is more of a U.S. dollar phenomenon and a belief that there will be more Bank of Canada interest-rate cuts ahead," says Caroline Logan of Custom House, "it failed to penetrate key resistance levels (Monday) but market players are watching the unit closely."

The U.S. dollar fell more than one per cent against the euro on Tuesday, under broad pressure ahead of this week's G7 meeting, and failed to lift far above a three-year low on the Japanese yen even after suspected Japanese intervention. It lost more than one per cent against the Swiss franc, sterling and the Australian dollar as selling snowballed after Monday's comment from U.S. Treasury Undersecretary John Taylor that growth would be the centre-piece of this week's gathering, avoiding the topic of currencies. "There has been a reassessment about the impact the G7 may have," Logan said.

Friday's monthly GDP report showed that Canada's economy stopped growing in November; making it very unlikely that fourth quarter growth will reach a four per cent annual rate. In previous comments, the Bank of Canada indicated that fourth-quarter growth anywhere below four per cent would leave the door open for another 25-basis-point rate cut.

Expect more volatility ahead of the G7 meeting. The Canadian dollar looks very vulnerable right now.

Tuesday's Expected Trading Range: 1.3300 (.7519) ~ 1.3425 (.7449)

Based on $5 million

by Christopher Scott, Special to the Ottawa Business Journal

Scott is Ottawa Branch Manager for Custom House Currency Exchange Ltd., 153 Sparks Street Ottawa, K1P 5B5 (613) 234-6005 or Toll-Free 1-800-242-3147. Fax: (613) 234-6008. E-mail him directly at Cscott@customhouse.com or by general office e-mail Ottawa@customhouse.com Visit online at www.customhouse.com