CANADA FX DEBT-C$ firms to 1-month high on U.S. data; CPI eyed

Tue Mar 26, 2013 5:10pm EDT

* C$ at C$1.0164 vs US$, or 98.39 U.S. cents
    * U.S. single-family home prices rise in January
    * Demand for U.S. durable goods surges 5.7 percent
    * Canadian bond prices fall across curve

    By Solarina Ho
    TORONTO, March 26 (Reuters) - The Canadian dollar rallied
nearly half a cent to a one-month high against the greenback on
Tuesday, helped by a better-than-expected rise in U.S. durable
goods orders in February and U.S. housing data that showed
recovery remained on track.
    The loonie, as it is colloquially known, strengthened
notably after data showed that U.S. single-family home prices
rose in January, the biggest annual increase in six-and-a-half
years, according to the closely watched S&P/Case Shiller
composite index. This was just the latest indicator the U.S.
housing market recovery remains on track. 
    Demand for long-lasting U.S. manufactured goods, which range
from toasters to aircraft, surged 5.7 percent in February and
reversed January's 3.8 percent plunge. This suggested factory
activity continued to expand at a moderate pace. 
    A stronger U.S. economy often benefits the Canadian dollar,
because it is the largest single market for Canadian exports.
    "The headline of durable goods orders is also somewhat
constructive for risk sentiment and maybe by association has
helped to provide the Canadian dollar with a little bit more ...
positive momentum," said David Tulk, chief Canada macro
strategist at TD Securities.
    The Canadian dollar finished its North American
trading session at C$1.0164 against the U.S. dollar, or 98.39
U.S. cents, stronger than Monday's North American close at
C$1.0212, or 97.92 U.S. cents. Earlier in the session, it
touched C$1.0161, or 98.41 U.S. cents, the currency's strongest
level since Feb. 22.
    The Canadian dollar was outperforming all major currencies
and was touching it's strongest level against the euro
 in two and a half months.
    Concerns over Cyprus and the region's debt woes continued to
pressure the euro, which also hovered near four-month lows
against the U.S. dollar. 
    Still, a string of soft economic data pressured Canada's
dollar over the last month and some analysts saw the move on
Tuesday as a temporary rebound before it weakens further.
    "We're of the opinion this is just a correction within the
context of a broader sequence of market developments to come,"
said Gareth Sylvester, director at Klarity FX in San Francisco,
noting there is good U.S. dollar support around the C$1.0135
level, but that the Canadian dollar is biased to weaken further.
    "We're really looking at that level to hold and then act as
a platform for another assault up to the (U.S. dollar) highs we
saw in February."
    Inflation data expected on Wednesday will be the next
closely watched domestic data. This will be followed by January
gross domestic product figures on Thursday, which are expected
to be weak. 
    Canadian government bond prices were lower across the curve,
with the two-year bond off 1.8 Canadian cents to
yield 1.008 percent. The benchmark 10-year bond fell
10 Canadian cents to yield 1.814 percent.
FILED UNDER: