CANADA FX DEBT-C$ slightly weaker after bouncing from 3-mth low

Fri Nov 9, 2012 4:29pm EST

* C$ ends at C$1.0013 vs US$ or 99.87 U.S. cents
    * C$ falls 0.6 percent for the week
    * Bond prices ease across the curve

    By Claire Sibonney
    TORONTO, Nov 9 (Reuters) - The Canadian dollar rebounded
from a three-month low against its U.S. counterpart in volatile
trade on Friday, ending only slightly weaker as it tracked a
modest bounce in equity and commodity markets following
encouraging U.S. economic data.
    An increasingly upbeat view of the economy and jobs market
drove U.S. consumer sentiment to a more than five-year high in
early November, while a jump in wholesale inventories suggested
the economy grew more than initially estimated last quarter.
 
    "It's somewhat of a disappointing bounce given the drastic
decline in sentiment in the post-election period. That said, the
Canadian dollar has weathered the storm admirably," said Adam
Button, currency analyst at ForexLive in Montreal.
    By late afternoon, the currency was near break-even for the
day, after comments by U.S. President Barack Obama and House of
Representatives Speaker John Boehner left investors little hope
that a deal to avoid the "fiscal cliff" was on the horizon.
 
    Financial markets fear that the $600 billion in automatic
spending cuts and tax rises set to begin in January, unless an
agreement is reached on addressing the budget deficit, will
drive the United States back into recession.
    The Canadian dollar ended the North American
session at C$1.0013 versus the U.S. dollar, or 99.87 U.S. cents,
slightly softer than Thursday's finish at C$1.0004 to the U.S.
dollar, or $0.9996. The currency ended the week down 0.6
percent.
    Earlier, the currency slipped to C$1.0034, or 99.66 U.S.
cents, its lowest level since Aug. 3.
    Analysts said C$1.0040 was the next significant level of
resistance for the U.S. dollar versus Canada's.
    The Canadian dollar was outperforming other major
currencies, including the euro, which slipped near a
one-week low.
    Weighing against the euro was talk about Europe's crisis
extending its reach to France and Germany. 
 
    Investors were wary, too, before a Greek parliament vote on
Sunday on its 2013 budget. The budget must be passed to unlock a
further tranche of international aid. 
    "For Canada, it's more a story of there hasn't been any
specific domestic news that has hurt us," said Camilla Sutton,
chief currency strategist at Scotiabank.
    Even better-than-expected Chinese economic data for October,
which pointed to a modest rebound in the world's second largest
economy, was largely overlooked.
    Looking to next week, analysts expect talk about the U.S.
fiscal cliff to continue to drive headlines and market
direction.
    "It's  really second-tier data in the week ahead so that
might keep the political story on the front pages, but
eventually the market will focus once again on improving
economic data in the United States and in China that we saw
overnight," said Button. "That's probably the bigger factor for
the Canadian dollar."
    Trading is expected to be very quiet on Monday with bond
markets closed for Remembrance Day in Canada and Veterans Day in
the United States. Forex and stock markets will remain open.
    The price of Canadian government debt reversed earlier gains
and eased across the curve, underperforming U.S. Treasuries.
 
    The two-year government-of-Canada bond was down 3
Canadian cents to yield 1.085 percent, while the benchmark
10-year bond was off 3 Canadian cents to yield 1.715
percent.
FILED UNDER:
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