CANADA FX DEBT-C$ steady against weaker US$ on central bank worries

Fri Jun 14, 2013 4:45pm EDT

* C$ at C$1.0169 vs US$ or 98.34 U.S. cents
    * Canadian factory sales fall 2.4 pct in April from March
    * U.S. producer prices rise; consumer sentiment off highs
    * Bond prices rise across curve

    By Solarina Ho
    TORONTO, June 14 (Reuters) - The Canadian dollar held steady
against a weaker U.S. dollar on Friday, recovering from earlier
losses, as market focus turned to the policies of the world's
major central banks.
    The U.S. dollar fell as investors worried major central
banks could begin reining in aggressive stimulus measures and
after data showed a decline in U.S. consumer sentiment.
 
    "It's more or less unchanged. Slight volatility today, based
on stop-loss selling in USD/CAD below C$1.0150," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial, referring to orders placed earlier to sell when a
currency reaches a certain price are triggered.
    The Canadian dollar, which was mixed against other
major currencies, finished its North American session on Friday
at C$1.0169 to the U.S. dollar, or 98.34 U.S. cents. This was
little changed from Thursday's finish at C$1.0166, or 98.37 U.S.
cents. During the day, the currency traded between C$1.0137 and
C$10188.
    "The strength in the Canadian data of late - the good
housing, the good unemployment - have really provided decent
support for the Canadian dollar," said Benjamin Reitzes, senior
economist and foreign exchange strategist at BMO Capital
Markets.
    "Going forward, I'm not convinced the Canadian dollar's
going to be able to hang in here."
    Earlier in the session, data showed Canadian factory sales
sank unexpectedly in April from March. The 2.4 percent plunge
was the fourth in five months and the biggest drop since August
2009. Analysts had expected a 0.3 percent rise. 
    "It does put GDP on a path maybe to be somewhere in the flat
to plus 0.1 (percent) neighborhood," said Reitzes. "Getting
beyond that would probably be pretty difficult, given the weak
manufacturing number."
    Many strategists said this week they expect the Canadian
dollar to weaken further as did the findings of a recent Reuters
poll. 
    The next big market driver could come when U.S. Federal
Reserve Chairman Ben Bernanke speaks next week. Market watchers
will be parsing the language he uses for hints on when the U.S.
central bank might begin scaling back its stimulus measures.
    "One of the main drivers and key themes within the currency
space would be the direction for interest rates as specifically
relating to FOMC meeting," said Spitz.
    Government bond prices rose across the curve, with the
two-year bond up 3.5 Canadian cents to yield 1.108
percent, and the benchmark 10-year bond up 16
Canadian cents to yield 2.120 percent.
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