CANADA FX DEBT-C$ firms to 3-week high as US$ skids on soft data

Fri Mar 15, 2013 4:42pm EDT

* C$ closes at C$1.0193 vs US$, or 98.11 U.S. cents
    * US$ continues broad selloff
    * Canada existing home sales falls in February
    * Bond prices rise across curve

    By Solarina Ho
    TORONTO, March 15 (Reuters) - The Canadian dollar touched
its strongest level against its U.S. counterpart in three weeks
on Friday, underpinned by a broader U.S. dollar selloff and as a
batch of U.S. data tempered recent optimism about the economy.
    The Canadian dollar gained nearly a cent this week, while
the greenback extended Thursday's retreat as the latest data
backed expectations the Federal Reserve is unlikely to change
course on monetary policy for the foreseeable future. 
    The Canadian dollar "had a pretty good day," Blake
Jespersen, managing director, foreign exchange sales at BMO
Capital Markets, said. "I think a lot of that was related to
poor positioning, overly long U.S. dollar positions that got a
bit stretched and a little bit of profit-taking at the end of
the week." 
    The Canadian dollar was trading at C$1.0193 against
the U.S. dollar, or 98.11 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, or 98.22 U.S. cents, earlier in the session.
    The loonie, as the currency is nicknamed, briefly 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 Adam
Button, a currency analyst at ForexLive in Montreal.
    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, while weaker against the euro and the
Japanese yen.
    U.S. manufacturing output bounced back in February, but
other reports on Friday showed a surge in gasoline prices caused
a spike in consumer inflation last month and eroded consumer
sentiment in early March. Still, the impact on the economy was
seen as likely limited and temporary. 
    Recent strong U.S. data, particularly on the jobs market,
helped propel a rally in the dollar for over a month, sending
the loonie to some of its weakest levels in eight months.
    "I still think the Canadian dollar is vulnerable to further
losses," said Jespersen.
    "The domestic economy is looking a little sluggish and
commodity prices have been sliding, so I think the Canadian
dollar still has quite a bit of room to fall in the near term."
    The price of Canadian government debt was higher across the
curve, with the two-year bond up 2 Canadian cents to
yield 0.995 percent, while the benchmark 10-year bond
 climbed 44 Canadian cents to yield 1.898 percent.
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