CANADA FX DEBT-C$ flat as Fed expectations offset weak U.S. data

Mon Aug 26, 2013 4:54pm EDT

* C$ at C$1.0503 vs US$, or 95.21 U.S. cents
    * U.S. durable goods orders have biggest drop in almost year
    * Fed speakers, Canada GDP this week
    * Bond prices rise across maturity curve

    By Alastair Sharp
    TORONTO, Aug 26 (Reuters) - The Canadian dollar was little
changed against the U.S. dollar in thin trading on Monday as
broad interest in acquiring the greenback on expectations of a
Fed-inspired rally offset weaker-than-expected U.S. durable
goods data.
    Orders for long-lasting U.S. manufactured goods such as
refrigerators and computers recorded the largest drop in nearly
a year last month, and a gauge of planned business spending on
capital goods in the United States tumbled. 
    "The U.S. data was a little soft," said Darcy Browne,
managing director of foreign exchange sales at CIBC World
Markets. The print initially boosted the loonie "because the
market's becoming hyper-sensitive to data," he said.
    But the data's effect on the currency did not last with
greenback buyers emerging quickly. 
    The U.S. Federal Reserve has said it could start to reduce
its massive stimulus program soon if economic data shows
economic recovery in the United States is on pace. Such a move
is expected to increase the value of the greenback.
     "I think the market is hoping that there is a dip to buy
U.S. dollars against Canada," CIBC's Browne said. "People
believe this U.S. dollar rally is real."
    The Canadian dollar ended the session trading at
C$1.0503 versus the greenback, or 95.21 U.S. cents, just weaker
than Friday's finish of C$1.0501 to the U.S. dollar, or 95.23
U.S cents.
    Monday's U.S. data followed figures last week that showed a
slowdown in residential construction and new home sales,
indicating that the U.S. economy may not grow much in the third
quarter from the second.
    "We did see U.S. slide on that (durable goods) news, but we
continue to believe overall the U.S. dollar should be well
supported in the coming weeks," said Blake Jespersen, managing
director, foreign exchange sales at BMO Capital Markets.
    "Therefore any opportunities to buy the U.S. dollar on dips
will be definitely taken advantage of," he said.
    CIBC's Browne said the Canadian dollar would likely trade
between C$1.0450 and C$1.0650 through the remainder of the week.
    Two Fed speakers and Canadian economic growth data could
drive currency direction during this final week of August,
typically one of the quieter weeks of the year, Jespersen said.
 
    The Fed has been the biggest news driver this summer and
investors are expected to parse over anything out of the U.S.
central bank amid expectations it will begin scaling back its
stimulus program in the coming months.
    Canadian government bond prices were higher across the
maturity curve, with the two-year bond rising 1
Canadian cent to yield 1.187 percent. The benchmark 10-year bond
 was up 33 Canadian cents, with a yield of 2.651
percent.
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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