CANADA FX DEBT-C$ slips vs US$, climbs near 3-year high vs yen

Thu Feb 7, 2013 4:43pm EST

* C$ ends at C$0.9980 vs US$, or $1.0020
    * C$ hits 2-week high against euro
    * C$ matches April 2010 high versus yen
    * Bond prices little changed across curve

    By Claire Sibonney
    TORONTO, Feb 7 (Reuters) - The Canadian dollar fell against
its U.S. counterpart on Thursday after weak North American data
reminded the market there are still headwinds facing economic
growth and after comments by the ECB raised worries about the
outlook for Europe. 
    The currency took some cues from major global stock markets,
which fell after European Central Bank President Mario Draghi
voiced concerns about the impact of the recent strength of the
euro on the euro zone economy, opening the door for a possible
rate cut. 
    "The whole risk-on/risk-off (correlation) is starting to
show some signs of wearing down, but I suspect it's not gone
from our market entirely," said Shaun Osborne, chief currency
strategist at TD Securities.
    "At the moment if we see a big off-day in stocks, we
probably will see the sort of high-beta commodity currencies
underperform to a degree."
    Also weighing on sentiment, 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 in December 2011. 
    In the United States, initial jobless claims fell less than
expected in the latest week and U.S. productivity dropped
sharply in the fourth quarter. 
    
    BIG MOVES ON CROSSES
    The Canadian dollar ended the North American
session at C$0.9980 against the greenback, or $1.0020, weaker
than Wednesday's finish of C$0.9955, or C$1.0045.
    Market players will be eyeing Friday's Canadian employment
report for January for further direction. 
    Canada's labor market likely came back to earth in January
after gravity-defying job gains in the final months of 2012,
with analysts predicting almost no new hiring in the month and a
rise in the unemployment rate. 
    Analysts noted that the U.S.-Canada currency pair is still
fairly rangebound, moving in a narrow 60-odd-point band this
week between C$0.9932-95.
    Osborne pointed to significant U.S.-dollar buying demand
around C$0.9950 and selling interest towards parity with the
Canadian dollar.
    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. 
    On the crosses on Thursday the Canadian dollar hit a
two-week high versus the euro. Against the yen
  it rose to its strongest level since April 2010.
    "Anything that is relevant in Canada at the moment seems to
be happening on the crosses," Osborne said.
    Canadian government bond prices were little changed across
the curve, with the two-year bond up less than one
Canadian cent to yield 1.156 percent, and the benchmark 10-year
bond off 4 Canadian cents to yield 2.000 percent.
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