CANADA FX DEBT-C$ gains offset by soft U.S. data

Thu Apr 26, 2012 9:14am EDT

* C$ at C$0.9832 vs US$, or $1.0169
    * Touches 7-month low at C$0.9806
    * BoC, Fed comments support C$
    * U.S. jobless claims weigh on market
    * Bond prices higher across curve

    By Jon Cook	
    TORONTO, April 26 (Reuters) - Canada's dollar was little
changed against its U.S. counterpart on Thursday after soft U.S.
jobs data offset the currency's overnight surge to a seven-month
high.	
    Weighing on the currency was U.S. data on Thursday that
showed jobless claims fell slightly last week but a trend
reading rose to its highest since January, the latest sign of a
weaker pace of healing in the still-struggling labor market.
 	
    In testimony before a Senate committee on Wednesday, Bank of
Canada Governor Mark Carney repeated that domestic economic
conditions have improved to the point where "it may become
necessary that some of the considerable monetary policy stimulus
in Canada may need to be withdrawn." 
 	
    That followed the Fed's renewed pledge to hold interest
rates near zero until late 2014 and Chairman Ben Bernanke's
comments that the central bank would not hesitate to resume
asset purchases if necessary.  	
    "The interest-rate picture is favoring the Canadian dollar
at this point," said Matt Perrier, a director of foreign
exchange sales at BMO Capital Markets.	
    "The market pricing of a move by the bank has been moved up
and yesterday's comments out of the Fed suggest that they're
still on hold by late 2014, barring any changes, so that's a
positive for the Canadian dollar over the near term."	
    At 8:42 a.m. (1242 GMT), the Canadian dollar was at
C$0.9832 versus the U.S. currency, or $1.0169, little changed
from Wednesday's close at C$0.9835 against the U.S. dollar, or
$1.0168. Overnight the currency hit C$0.9806, its highest since
Sept. 19.	
    The currency's gains were also pared by data that showed
euro zone economic sentiment fell more than expected in April,
driven by more pessimistic industry and services sectors, as the
economy sinks into recession. 	
    Perrier said the holding below the C$0.9850 level was
significant for the Canadian currency, which has been locked in
a tight range for the past four months. He said the currency may
test its September low of C$0.9736 before finding strong
resistance.	
    "We have broken through the bottom of the range," Perrier
said. "There's some short-term possibility of a correction, but
overall the trend still favors a strong Canada."	
    Canadian government bond prices were higher across the
curve. Canada's two-year bond rose 7 Canadian cents
to yield 1.395 percent, while the benchmark 10-year bond
 climbed 22 Canadian cents to yield 2.078 percent.
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