Canada Afternoon: C$ Ends Modestly Higher Amid Less Risk Aversion

The Canadian dollar ended higher Monday, as a rebound in commodity prices and relatively less global alarm over the debt crisis in Dubai served to lessen the risk aversion that had weakened the Canadian currency in recent sessions.

The U.S. dollar was trading at C$1.0558 at 3:34 p.m. EST (2034 GMT), from C$1.0585 at 8:00 a.m. EST (1300 GMT), and from C$1.0612 late Friday.

Movements for the Canadian dollar were fairly narrow in contrast to last week, as the currency consolidated some of the recent big moves amid some subsidence in the concern about the potential for another global financial crisis from the problems in Dubai.

The Canadian dollar also got some muted supported from Canada's third quarter gross domestic product report, which underperformed expectations but nonetheless contained some encouraging underlying details that had analysts predicting a much stronger final quarter of 2009.

Canada's GDP posted positive growth in July-September--signaling an end to recession--after three consecutive quarters of decline, but the third quarter's 0.4% annualized pace of expansion was less than the 1.0% rate seen in the consensus forecast.

Notwithstanding the tepid headline figure however, components of the report such as merchandise trade, consumer and business capital spending suggested a more robust performance may be in the offing for the economy in late 2009 and heading into 2010.

So long as commodities and the global risk environment remain supportive, most currency watchers still expect to see a stronger tone from the Canadian dollar over the relatively near-term, even if caution heading into year-end results in a continued range trade for a while longer.

"By and large, the market is probably biased to take the Canadian dollar a bit stronger," said Jack Spitz, director of foreign exchange at National Bank in Toronto. "As long as the market is biased to favor risk and commodities remain supported around these levels, I think the Canadian dollar is likely to outperform, but still within the range."

Senior currency strategist Shaun Osborne of TD Securities in Toronto said that with many accounts focused on capital preservation heading into the year-end, conservative positioning and continued trading within a fairly well-defined range of about C$1.0400 and C$1.0750 are likely in coming weeks.

These are the exchange rates at 3:34 p.m. EST (2034 GMT), 8:00 a.m. EST (1300 GMT), and late Friday.