Based on $1 million
The Canadian dollar traded in a fairly tight range Monday morning.
The loonie continues to be supported by more favorable market sentiment due to the recent Bank of Canada rate hike and an increased interest rate differential over the U.S., higher commodity prices, a favorable economic outlook for Canada as well as a general boost in secondary currencies like the loonie. Focus for this week is on Tuesday's March consumer price index figures, which should help gage inflation, and February retails sales. Wednesday will see the release of the Bank of Canada Monetary Policy Report, which could offer more insight into the central bank's economic outlook for Canada. Analysts feel the loonie could trade stronger in the next while, especially if the favorable conditions continue.
The U.S. dollar is slightly lower against the Japanese yen and British pound, but gained a bit against the euro Monday morning. Another big week of earnings reports and key data is expected for the U.S. The greenback has been on the defensive lately, with some U.S. data releases failing to excite. The view is that U.S. equities could be overvalued and that better returns can be found outside of the U.S. Last week, Federal Reserve chairman Alan Greenspan dampened demand for the dollar when he said the nation's growth prospects were " uncertain" and that the central bank has "ample" time to raise interest rates before inflation accelerates. Greenspan's comments prompted some analysts to rethink expectations of a near term Fed rate increase. It appears the Fed will wait until a more sustainable economic recovery is seen from the U.S. before making any further moves. This coupled with the moderating of capital flowing into U.S. assets in the near term will likely drag on the greenback for now.
The euro was down against the U.S. dollar on concern that labour negotiations in Germany may lead to wage increases that will push inflation higher, prompting the ECB to raise rates in coming months and slowing growth in the region. The euro was also dragged on by news that far right French leader Le Pen emerged as the main challenger to President Jacques Chirac for the second round of the presidential election. Le Pen, a critic of the EU, is not expected to defeat Chirac, but his success over PM Jospin has kept downward pressure on the euro so far Monday.
The Japanese yen was higher on the back of a two per cent rise in the Nikkei and on news that the country's trade surplus jumped 39 per cent in March, most of that with the U.S. This gives hope to an export led recovery for the struggling Japanese economy, although officials are still voicing concern that too rapid a rise in the yen would be undesirable.
Christopher Scott, Ottawa Branch Manager
Custom House Currency Exchange Ltd. 153 Sparks Street OTTAWA, Ontario K1P
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