CANADA FX DEBT-C$ weakens to lowest in four years

Thu Jan 9, 2014 9:52am EST

* Canadian dollar at C$1.0851 or 92.16 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Jan 9 (Reuters) - The Canadian dollar weakened to
hit a more than four-year low against the greenback on Thursday
as a recent sell-off continued unabated, reinforcing
expectations the currency will be in for a rocky 2014.
    Investors digested a round of domestic housing data, which
showed building permits fell more than expected, as did housing
starts, while home prices were unchanged. 
    At the same time, first-time claims for U.S. unemployment
benefits declined more than expected last week. 
    "That contrast - better U.S. data versus middling Canadian
data - bodes well for the U.S. dollar and is not so good for the
Canadian dollar," said Benjamin Reitzes, senior economist at BMO
Capital Markets in Toronto.
    The Canadian dollar has fallen for four straight sessions as
bearish sentiment against the loonie has grown. A dovish Bank of
Canada and the gradual unwinding of the Federal Reserve's bond
purchases are expected to weigh on the currency.
    The most recent drop was sparked by data earlier in the week
that showed a steep widening of Canada's trade deficit, while
the U.S. trade deficit fell to its lowest in four years.
    The Canadian dollar was at C$1.0851 to the
greenback, or 92.16 U.S. cents, weaker than Wednesday's close of
C$1.0804, or 92.56 U.S. cents. The loonie hit a session low of
C$1.0872, its lowest since October 2009.
    "It's tough to stop this momentum once you get going," said 
Reitzes.
    "The market gets its mind made up and wants the (U.S.)
dollar higher and that's the way it's going to go."     
    Technical resistance for the U.S. dollar-Canadian dollar
should lie at C$1.09 and C$1.1235, he said. 
    Investors were looking ahead to unemployment reports due to
be released on Friday from Canada and the United States. 
    The Canadian economy is forecast to have added 14,600 jobs
in December, though that is down from 21,600 the previous month.
The unemployment rate is seen holding steady at 6.9 percent.
 
    Analysts say that a number that comes in significantly below
market expectations could put further pressure on the loonie. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2 Canadian cents
to yield 1.102 percent and the benchmark 10-year was
up 13 Canadian cents to yield 2.704 percent.
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