Canadian Dollar Down, But Off Lows, As Commodity Currencies Retreat

The Canadian dollar lost some ground against the greenback Tuesday as commodity currencies in general retreated, but managed to pare some of its losses and remain well within recent trading ranges.

The U.S. dollar was recently at C$0.9918, from C$0.9860 late Monday, according to data provider CQG.

The New Zealand, and Australian and Canadian dollars all retreated in overnight trading after an executive at mining giant BHP Billiton cautioned that Chinese demand for iron ore would be lower than expected.

"We saw, overnight, the commodity currencies come under particular pressure after that BHP comment regarding China's demand for raw materials," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc. in Washington.

The selling pressure was more pronounced for the Aussie and Kiwi dollars because of their close ties to China, but the worries about China also weighed on the commodity-sensitive Canadian unit, he said.

Buying interest in the Canadian unit from sovereign players, including central banks, helped reverse some of the Canadian dollar's losses after the U.S. dollar scrambled to a session high of C$0.9970 in morning trading, said Dave Bradley, director of foreign-exchange trading at Scotia Capital.

Some of Scotia's corporate clients are also interested in the currency in the C$0.9980 to C$1.0000 range, he said.

Bradley said the rapid dash higher by the greenback may have been triggered partly by traders taking short positions on the U.S. dollar on the view that Swiss-based Glencore International's proposed purchase of Canadian grain handler Viterra Inc. would trigger Canadian dollar buying in the amount of its total C$6.1 billion value, and then reversing them when it was reported that Glencore's Canadian currency needs would be closer to C$3 billion because it's selling some of Viterra's assets.

"I think the market was surprised, [and] caught off guard, caught short," Bradley said.

The U.S. dollar couldn't sustain its advance against the Canadian dollar as it retreated against the euro and other major currencies in North American trading.

"The move was a little bit exaggerated, I would have to say, and we're right back at the levels we opened at first thing this morning," Bradley said.

The U.S./Canadian dollar pair remains mired in a trading range between C$0.9840 and C$1.000, he said.

These are the exchange rates at 3:59 p.m. EDT (1959 GMT) and 8:00 a.m. EDT (1200 GMT) Tuesday, and late Monday.