Canadian dollar weakens

The Canadian dollar slid against its US counterpart on Friday as sluggish Chinese growth and Europe's lingering debt mess weakened risk sentiment, but hopes for a rosier outlook from the Bank of Canada next week boosted Canada's currency above other majors.
The euro fell against the US dollar for the second straight week as rising Spanish borrowing costs spooked investors. Global growth fears were compounded by data that showed China's economy grew less than expected in the first quarter. While nervous investors sought refuge in the US dollar, Canada's currency outperformed the euro, sterling, Swiss franc and Australian dollar.
"It's a decent performance given the risk aversion we've seen come back to the fore," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital. The Canadian dollar finished at C$0.9984 versus the US dollar, or $1.0016, down from Thursday's North American finish at C$0.9945 versus the US dollar, or $1.0055. It edged down 0.1 percent for the week. Canada's triple-A rated economy, underscored by last month's strong employment numbers and a continued hot housing market, has become increasingly attractive to foreign investors worried about volatility in Europe and slowing growth in China.
Chandler said another factor keeping the Canadian dollar from weakening further was anticipation that the Bank of Canada would be "a bit more hawkish" in next week's rate statement and Monetary Policy Report. Bank of Canada's next policy announcement date is April 17. The next day it will offer detailed forecasts in its quarterly Monetary Policy Report, followed by a press conference by Governor Mark Carney. The median forecast in a Reuters poll of 40 economists and strategists shows the next interest rate hike will come in the second quarter of 2013. Higher interest rates or expectations of higher rates tend to help currencies strengthen by attracting international capital flows.
The Canadian dollar was still seen trading within a narrow range of between C$0.99 and C$1.01 for the near term. Canadian government bond prices climbed across the curve, with Canada's two-year bond up 6 Canadian cents to yield 1.203 percent. The 10-year bond added 53 Canadian cents to yield 1.997 percent.