CANADA FX DEBT-C$ weakness masked by U.S. dollar slip

Tue Jan 22, 2013 8:54am EST

* C$ at C$0.9932 to US$, or $1.0068
    * Weaker versus yen, euro, Aussie
    * Retail sales jump provides moderate support

    By Alastair Sharp
    TORONTO, Jan 22 (Reuters) - The Canadian dollar was flat
against its U.S. counterpart on Tuesday but weakened
significantly versus a string of other currencies as the two
North American units faded.
    The Japanese yen rose after that country's central bank said
it would switch to an open-ended commitment to buy assets next
year, though the delayed implementation disappointed those who
expected more aggressive monetary easing. 
    The slip in the Canadian currency extended a recent split
from the fate of commodities and equity markets and showed much
more sympathy with its U.S. cousin.
    "It's symptomatic of a slightly worse turn for the U.S.
dollar, which tends to drag the Canadian dollar down on the
crosses," said Royal Bank of Canada currency strategist Elsa
Lignos.
    At 8:43 a.m. (1343 GMT) the Canadian dollar was
trading at C$0.9932 to the greenback, or $1.0068, exactly the
same level at which it closed Monday's North American session.
    It weakened sharply against the yen, the British
pound and the Australian and New Zealand
 dollars. 
    The currency took heart from record high domestic retail
sales data released on Tuesday, which showed shoppers bought
more new cars and electronics.  
    "Retail sales is another piece of positive data that will
help cap Canadian weakness going forward," said Michael O'Neill,
vice president of foreign exchange trading at Jitneytrade. But
he warned, "You can't read too much into Canada solo."
    RBC's Lignos said the Canadian dollar was near the top of
its expected range for the week and would be unlikely to weaken
much further without a major surprise from the Bank of Canada's
policy announcement due on Wednesday. 
    "The Bank of Canada is the pick of the week for Canada, but
I don't think it can do enough to displace some of the bigger
macro stories out there at the moment," she said, adding that
downside support was found at $C0.9860 and resistance existed at
C$0.9980.
    The two-year bond was up half a Canadian cent to
yield 1.191 percent, while the benchmark 10-year bond
 fell 10 Canadian cents to yield 1.945 percent.
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