The Canadian dollar opened slightly weaker Monday morning following a fairly slow overnight session.
A holiday in the U.S. dampened activity in the foreign exchange market, allowing the Canadian currency to drift weaker.
The U.S. dollar held on to most of Friday afternoon's gains as markets await testimony by European Central Bank President Jean-Claude Trichet for his latest views on the single currency's strength. There is some nervousness over what, if anything, European authorities might do to cool down the single currency's rise in recent months.
Reports over the weekend quoted Hans-Werner Sinn, the head of Germany's IFO Institute, as saying that it was well within the European Central Bank's abilities to aim for a 10-cent reduction in the euro/U.S. dollar rate by buying around $30 billion through market intervention. Sinn's comments added to the mix of market talk.
Analysts said concerns over U.S. budget and current account deficits still left risks skewed to the downside for the U.S. dollar, but Friday's price action may also indicate that investors need fresh factors for another push to weaken it further. European officials believe that U.S. trade "woes" have weighed unduly on the dollar versus the euro. The same can be said of Friday's knee-jerk reaction, with the euro shooting higher.
The Canadian dollar will likely follow the U.S. dollar due to the close economic links between the two countries. Also, the Bank of Canada's bias toward easing will make it difficult for the currency to strengthen.
The Canadian dollar is holding steady at the moment. Without much activity or news out there, the currency will likely trade in a narrow range until North America opens again Tuesday morning.
Monday's Expected Trading Range: 1.3100 (.7633) ~ 1.3210 (.7500)
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
