TORONTO: The Canadian dollar ended nearly flat against the greenback on Wednesday as the market sought direction after a recent correction and as investors trained their focus on key employment reports in both Canada and the United States at the end of the week.
Disappointing economic data added to the softer tone as the value of Canadian building permits fell unexpectedly in December, with residential permits sinking for a second straight month.
After hitting a 4-1/2-year low last week, the loonie has managed to regain some ground in recent days as investors book profits.
"I still think the general tone is probably corrective for the Canadian dollar, we saw a pretty significant turnaround of the liquidation trade late last week," said Shaun Osborne, chief currency strategist at TD Securities in Toronto.
Still, analysts say the factors that have pressured the loonie over the past few months - including a more dovish stance from the Bank of Canada - have not gone away and are likely to continue to weigh on the currency.
"I think this is a pause in the trend. You've got to remember we've come from C$1.02 in September up to C$1.12 without any real correction at all," Osborne said.
"So I wouldn't be at all surprised to see a bit of a shakeout just from a short-term point of view, but we still think that you've got to be looking to get long US dollar-Canadian dollar."
The Canadian dollar ended the North American session at C$1.1080 to the greenback, or 90.25 US cents, a tad stronger than Tuesday's close of C$1.1081, or 90.24 US cents.
Investors were looking ahead to Friday's Canadian employment report, which is expected to show hiring picked up in January after the economy unexpectedly shed jobs at the end of last year.
At the same time, data in the United States is expected to show the world's largest economy added 185,000 jobs last month after disappointing job growth in December. Data earlier on Wednesday showed US private employers added 175,000 jobs last month, just shy of economists' expectations for 180,000.
"For the most part, it seems like we're going to have rangebound trading until payrolls data comes out, which is a pretty big piece of data for the end of the week," said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto.
"From there, we'll start to gain some direction."
Canadian government bond prices were lower across the maturity curve, with the two-year down 3.2 Canadian cents to yield 0.978 percent and the benchmark 10-year off 26 Canadian cents to yield 2.383 percent.
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