TORONTO: The Canadian dollar firmed against the greenback on Monday, bouncing back from a more than five-month low hit overnight, even after data over the weekend showed the Chinese economy lost steam in August.
Investors started the week with some major events on the horizon, including a policy statement from the US Federal Reserve on Wednesday and a speech from the head of the Bank of Canada on Tuesday.
Scotland's vote on whether to leave the United Kingdom will also be later in the week, which has the potential to roil markets.
The US dollar-Canadian dollar broke through some key resistance levels last week and took a run at piercing the next barrier at C$1.11 in the overnight session but was unable to push above it.
"The fact that we couldn't get above the C$1.11 suggests that the market is very much in a wait and see attitude with those three important items this week," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto.
Stephen Poloz, governor of the Bank of Canada, will be speaking on the topic of the role of a floating exchange rate in his first speech since the central bank reaffirmed its neutral stance in a policy statement earlier this month. The speech will be followed by a press conference.
Still, the Fed announcement is likely to be the biggest event of the week, with investors speculating the central bank could provide insight on when interest rates will start to rise. Any hint of a rate hike sooner rather than later would likely boost the greenback to the loonie's detriment.
"The market wants to see, aside from the end of tapering, what's in store in terms of any actual tightening schedule. The US dollar seems to be performing well against all currencies, but that is lining itself up to be the story of the week,' said Mikolich.
The Canadian dollar was at C$1.1071 to the greenback, or 90.32 US cents, stronger than Friday's close of C$1.1094, or 90.14 US cents.
A number of weak economic figures from China over the weekend prompted some economists to trim their growth forecasts for the country. The loonie is often sensitive to economic news out of China, which is a major consumer of resources.
Canadian government bond prices were higher across the maturity curve, with the two-year up 1-1/2 Canadian cents to yield 1.151 percent and the benchmark 10-year up 16 Canadian cents to yield 2.223 percent.
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