The Canadian dollar finished a touch lower versus the US dollar on Thursday as data showed Canada's trade surplus shrank more than expected in December, but the currency remained locked in a tight range. Canadian bond prices edged higher on the short end of the curve as the economic data added further credence to the idea of additional Bank of Canada rate cuts.
The Canadian dollar closed at C$1.0002 to the US dollar or 99.98 US cents, down from 99.70 Canadian cents per US dollar, or US $1.0030, at Wednesday's close. Figures that showed Canada's trade surplus fell to a nine-year low in December knocked the Canadian dollar to a session low of C$1.0017 or 99.83 US cents, early in the session.
The currency rebounded and hit a session high of US $1.0030, or 99.70 Canadian cents, by midday due to a weaker US dollar after the US Federal Reserve said the outlook for the US economy had worsened. But the currency eased in the latter half of the session as investors focused more on the negative data instead of the favourable Canada-US interest rate gap that is expected to remain in the Canadian dollar's favour for some time.
"That should be better for the Canadian dollar, but weighing against it is people are still worried that a slowdown in the US at some point will take a bite out of the Canadian economy," said Steven Butler, director of foreign exchange at Scotia Capital. "And even though we keep seeing (Canadian) employment numbers dismissing all the bad news and plowing ahead with good news, I think it's still a worry on people's minds."