Canadian dollar in broad retreat

The Canadian dollar was weaker against the greenback and other major currency counterparts on Tuesday but it stayed clear of the more than six-month lows reached last week as investors looked ahead to Friday's employment figures. Data on Tuesday that showed a larger-than-expected drop in Canadian building permits in August from July briefly weighed on the currency. Statistics Canada said the retreat in August was primarily due to fewer plans to build non-residential buildings in Quebec, and residential buildings in Ontario.
Analysts noted, however, that the permits data is typically highly volatile. "We have seen it drift up a little bit, but it seems to be anchored in this mid-to-high-C$1.11's ... We were maybe due for a bit of a pullback in permits," said Don Mikolich, executive director, foreign exchange sales at CIBC World Markets, adding that investors were looking ahead to Friday's employment data.
"It's one of the main things people are watching with a little apprehension, because we've had such big volatile components within that release." The Canadian dollar closed at C$1.1171 to the US dollar, or 89.52 US cents, softer than Monday's close at C$1.1131, or 89.84 US cents.
The currency is expected to stay around the high C$1.11 to low C$1.12 range ahead of the jobs data, but could test last week's low of C$1.1271, its weakest level since March, if the employment figures are negative, Mikolich said. Forecasts call for 20,000 new jobs in September, according to a Reuters poll.
The Canadian dollar could also see some moves from housing starts data due on Wednesday. Expectations may be tempered following Tuesday's soft permits data. "Finally, people are starting to say, maybe we should differentiate a little between a North America phenomenon and see what's happening individually in both these countries. I think that's what's coming home to roost here," said Mark Chandler, the head of Canadian fixed income and currency strategy at RBC Capital markets. Canadian government bond prices were higher across the maturity curve, with the two-year rising 5 Canadian cents to yield 1.084 percent and the benchmark 10-year climbing 56 Canadian cents to yield 2.028 percent.