CANADA FX-C$ edges higher as markets fret over 'fiscal cliff'

Mon Nov 12, 2012 5:03pm EST

* C$ at C$0.9995 vs US$, or $1.0005
    * Chinese industry, exports and retail sales beat forecasts
    * C$ underperforms Aussie, New Zealand dollars

    By Solarina Ho
    TORONTO, Nov 12 (Reuters) - The Canadian dollar notched a
small gain against its U.S. counterpart in quiet trading on
Monday after touching a three-month low in the previous session.
    The currency echoed the limited moves made on Monday by
equity markets, where worries about the possibility of a fiscal
crisis in the United States overshadowed encouraging economic
data from China. [ 
    "There's not much to move on today. That reflects the ranges
and levels for the both the Canadian dollar and equities," said
Benjamin Reitzes, senior economist and foreign exchange
strategist at BMO Capital Markets. 
    Reitzes noted that worries over the repercussions of massive
spending cuts and tax increases due to kick in in the United
States early next year hit sooner than people expected.
Investors fear the U.S. economy could head back into recession,
unless the White House and Congress reach a deal to avert the
budget actions.
    "We're optimistic things will work out and that should bode
well for the Canadian dollar, though in the interim you could
get some meaningful volatility as there are concerns the U.S.
economy could go off that fiscal cliff," Reitzes said.
   The Canadian dollar finished Monday's trading at
C$0.9995 versus the U.S. dollar, or $1.0005, stronger than the
previous North American session finish of C$1.0013, or 99.87
U.S. cents.
    Canada's dollar was outperforming most other major
currencies, but was underperforming its fellow commodity-linked
currencies - the Australian and New Zealand dollars - which
benefited more from the Chinese data. Figures showed China's
industrial output, exports and retail sales all beat
expectations in October.
    The results offered a reassurance that the economy of one of
the world's largest consumers of copper and oil - among other
commodities - was turning the corner.  
    "On the face of it, the Chinese numbers overnight were
probably a little bit better, suggesting some strength in the
export markets," said Shaun Osborne, chief currency strategist
at TD Securities, but he cautioned that more data from China, as
well as the United States and Europe, is needed to suggest
traction in the global economic recovery.
    Bond markets were closed in the United States and Canada for
Veterans Day and Remembrance Day respectively, and government
offices in both countries were also closed.
    The currency may find light direction from Canadian
manufacturing and home sales data later this week as well as
retail sales from the United States. Superstorm Sandy is
expected to have impacted the retail sales data.
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