TORONTO: The Canadian dollar managed a modest bounce against the US dollar on Monday, as the greenback paused after recent gains in the face of fresh concern about the global growth outlook.
It is "essentially a story of consolidation and I think investors keeping one eye on equity markets today and another eye on where they can probably start to get long US dollars again," said Shaun Osborne, chief currency strategist at Scotiabank.
The Canadian dollar hit a five-week low of C$1.3318 on Friday after strong US jobs data raised the prospect of a December rate hike from the Federal Reserve, overshadowing a solid, but election boosted, Canadian jobs gain.
"If we do get to lift off (of the US interest rate)," said Osborne, "which I think we will, in December, then there is probably a fair bit more dollar strength to come here, we're not really priced at all for even a very slow burn tightening for next year."
The Canadian dollar ended at C$1.3275 to the greenback, or 75.33 US cents. That was stronger than Friday's close of C$1.3296, or 75.21 US cents.
Weak Chinese trade data raised concern about the global growth outlook, with both exports and imports falling more than expected.
But comments from the normally dovish president of the Boston Fed, Eric Rosengren, helped sustain momentum toward a December rate hike.
Canadian housing starts pulled back in October, falling to 198,065 from an upwardly revised 231,304 in September, although close to expectations.
Weaker oil prices weighed on Canada's economic outlook, with US crude oil finishing down 1 percent at $43.87, while Brent crude lost 0.34 percent to $47.26.
Nonetheless, expectations for another rate cut from the Bank of Canada have been almost fully unwound, with the market implying nearly 10 basis points in tightening through the end of 2016, as calculated by Reuters.
"The Bank would probably like to think that 0.5 (percent) is a hard floor for rates at this point," said Osborne, adding "they're expecting the exchange rate to do some of the heavy lifting for them."
Canadian government bond prices were mixed across the maturity curve, with the two-year price up 1 Canadian cent to yield 0.672 percent and the benchmark 10-year falling 9 Canadian cents to yield 1.725 percent.
The Canada-US two-year bond spread was -21.8 basis points, while the 10-year spread was -62.8 basis points.
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