CORRECTED-CANADA FX DEBT-C$ steps back after disappointing N.American data

Thu Feb 7, 2013 10:12am EST

(Corrects to show prices of new homes in December where higher
versus a year earlier)
    * C$ hits session low of C$0.9969 vs US$, or $1.0031
    * Bond prices little changed across curve

    By Claire Sibonney
    TORONTO, Feb 7 (Reuters) - The Canadian dollar drifted to a
session low against its U.S. counterpart on Thursday after weak
North American data reminded investors there were still many
headwinds for economic growth.
    Canadian building permits posted their biggest two-month
drop in at least 24 years in December, though prices of new
homes ended the year 2.3 percent higher than December 2011.
  
    In the U.S., initial jobless claims fell less than expected
in the latest week and U.S. productivity dropped sharply in the
fourth quarter. 
    Following the flurry of reports, Canada's currency 
hit a session low of C$0.9969 versus the greenback, or $1.0031,
from around C$0.9957, or $1.0043, immediately before the data.
    The currency, however, was not much weaker than Wednesday's
close, and has remained in a narrow 60-odd-point range this week
between C$0.9932-69 The European Central Bank's decision to
leave rates on hold similarly had little impact. 
    "The direct impact is on the euro but not much spillover
anywhere else," said Adam Cole, global head of FX strategy at
RBC Capital Markets in London.
    "In all honesty (the Canadian dollar) is probably sidelined
as everybody is watching ... the ECB and their attitude to the
exchange rate and potential policy changes."
    Markets were still assessing comments from ECB President
Mario Draghi at a news conference about how the currency's gains
might affect the fragile euro zone economy. 
    At 9:40 a.m. (1440 GMT),  the Canadian dollar stood
at C$0.9962, or $1.0038, slightly weaker than Wednesday's North
American session close at C$0.9955, or C$1.0045.
    Cole also noted that traders would be closely monitoring
Canada's critical employment report for January due on Friday.
 
    A Reuters poll released on Wednesday showed economists and
foreign exchange strategists expected the Canadian dollar to
strengthen over the course of 2013, looking past the Bank of
Canada's recent dovish comments and finding support from an
improving U.S. economy. 
    Canadian government bond prices were little changed across
the curve, with the two-year bond flat to yield 1.160
percent, and the benchmark 10-year bond off 11
Canadian cents to yield 2.003 percent.
    

 (Reporting by Claire Sibonney; Editing by Theodore d'Afflisio)
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