CANADA FX DEBT-C$ firms amid broader selloff of U.S. dollar

Fri Mar 15, 2013 10:05am EDT

* C$ at C$1.0210 vs US$, or 97.94 U.S. cents
    * US$ continues broad selloff
    * U.S. manufacturing data below expectations
    * Canada existing home sales falls in February

    By Solarina Ho
    TORONTO, March 15 (Reuters) - The Canadian dollar touched
its strongest level against its U.S. counterpart in three weeks
on Friday, bolstered by a broader U.S. dollar selloff and with
the latest U.S. manufacturing data coming in below expectations.
    The greenback extended Thursday's retreat as some traders
took profits from its recent rally and as uncertainty crept in
over whether recent encouraging U.S. economic data will be
enough to prompt an early retreat from monetary easing by the
Federal Reserve. 
    It was also pressured by strong gains in sterling after the
Bank of England's governor suggested he did not want the pound
to fall any further.
    "The overwhelming driver is a retracement, a pull-back in
the U.S. dollar...On a number of fronts, the U.S. dollar made
major gains over the last month," said Adam Button, a currency
analyst at ForexLive in Montreal.
    He said that some long-term U.S. dollar positions were being
reduced.
    At 9:44 a.m. (1344 GMT), the Canadian dollar was
trading at C$1.0210 against the U.S. dollar, or 97.94 U.S.
cents, firmer than Thursday's North American finish of C$1.0223,
or 97.82 U.S. cents. It had touched C$1.0181, 98.22 U.S. cents,
earlier in the session.
    The loonie, as the currency is nicknamed, pared some gains
after data showed sales of existing homes in Canada fell in
February from January and year-over year sales plummeted, more
evidence that the country's once-hot housing market is slowing.
 
    "Housing is the chief risk for the Canadian dollar and the
Canadian economy and any indication of a strong move in one
direction or another, the market will be sensitive," said
Button.
    He noted, however, that Friday's data point was not a major
mover.
    "One data point isn't going to write the story."
    The currency's performance was mixed against other major
currencies. It was stronger than the Australian dollar
 after touching its weakest level in more than a year
on Thursday, and was weaker against the sterling, the
euro and the Japanese yen.
    U.S. consumer prices recorded their largest increase in
nearly four years in February as the cost of gasoline surged,
but there was little sign of a broad pickup in inflation to
trouble the Federal Reserve. 
    The New York state manufacturing sector expanded for the
second month in a row in March, though the pace of growth cooled
slightly and the index for new orders fell, data from the New
York Federal Reserve showed on Friday.
    The price of Canadian government debt was higher across the
curve, with the two-year bond up 1.5 Canadian cents
to yield 0.998 percent, while the benchmark 10-year bond
 rose 23 Canadian cents to yield 1.922 percent.
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