CANADA FX DEBT-C$ gets a respite after recent slide to 4-yr low

Mon Jan 13, 2014 4:36pm EST

* Canadian dollar at C$1.0846 or 92.20 U.S. cents
    * Bond prices mixed across the maturity curve


    By Leah Schnurr
    TORONTO, Jan 13 (Reuters) - The Canadian dollar strengthened
against the greenback on Monday, consolidating after last week's
rout as a lack of domestic economic news this week was expected
to give the loonie a reprieve. 
    The loonie got an additional boost in midmorning after a
Bank of Canada survey found businesses were hopeful in the
fourth quarter that sales would increase over the next year.
Canadian firms were also more upbeat on investment and
hiring. 
    Canada's currency lost ground every day last week and
touched a more than four-year low on Friday after data showed
the country's economy unexpectedly shed jobs in December. 
    The jobs report fueled expectations the Bank of Canada will
maintain its recent dovish stance, one of the factors that is
seen keeping pressure on the loonie in 2014. Still, the
swiftness of the currency's selloff may prompt markets to take a
pause.   
    The Canadian dollar also benefited from a weaker greenback
on Monday as disappointing jobs growth in the United States
prompted investors to reassess how quickly the Federal Reserve
could wind down its stimulus program.  
    "Canada has gained a little bit of ground back on what we'd
seen as a pretty heavy selloff over the past couple weeks," said
Don Mikolich, executive director of foreign exchange sales at
CIBC World Markets in Toronto.
    Even so, the day's strength was likely just a break before
the loonie heads lower again, Mikolich said.
    "It's hard to see any kind of material appreciation in the
Canadian dollar much below C$1.0780, C$1.0730. Those would seem
to be fairly decent support levels at this stage, unless we got
some other interesting numbers." 
    The Canadian dollar ended the North American
session at C$1.0846 to the greenback, or 92.20 U.S. cents,
stronger than Friday's close of C$1.0901, or 91.73 U.S. cents. 
    The Canadian economic calendar is light this week, while
south of the border investors will parse reports including
retail sales and the consumer price index. U.S. data that comes
in on the soft side could benefit the loonie, analysts said.
    "It's pretty much dire straits for the loonie, everyone has
definitely been piling on the short Canadian dollar trade," said
Scott Smith, senior market analyst at Cambridge Mercantile Group
in Calgary.
    "I think it's very likely this week we'll see a bit of
consolidation in the loonie."
    Attention will also be turning to the Bank of Canada's
interest rate decision and policy statement that will be
released next week.
    "I think that with the data we've seen over the past two
weeks, the Bank of Canada could definitely get a little more
dovish" in the statement's language, said Smith. 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year off 5 Canadian
cents to yield 1.039 percent. The benchmark 10-year 
was up 12 Canadian cents to yield 2.543 percent.
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