CANADA FX DEBT-C$ steady after last week's gains

Mon Feb 10, 2014 10:00am EST

* Canadian dollar at C$1.1051 or 90.49 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Feb 10 (Reuters) - The Canadian dollar was little
changed against the greenback on Monday as a light economic
calendar for the week left the currency searching for a catalyst
after it managed to regain some ground in recent sessions.
    Data on housing starts on Monday was one of the few economic
reports on tap for the week. Starts cooled to 180,248 units in
January from a downwardly revised 187,144 in December, but the
Canadian dollar had little reaction to the figure, which came in
close to economists' expectations for 184,000. 
    After a weak start to the year, the Canadian dollar bounced
last week from a 4-1/2-year low, but analysts expect its path is
ultimately still downward. 
    "If you had to pick a continuing trend, it would still be
Canada weakening after this sideways period unless we were
getting a consistent period of stronger-than-expected Canadian
data," said Don Mikolich, executive director of foreign exchange
sales at CIBC World Markets in Toronto.
    A more dovish turn in policy from the Bank of Canada in
recent months has weighed on the Canadian dollar as analysts
expect interest rates will stay low for some time. A recent poll
showed market watchers expect the currency to weaken to C$1.12
in the next six months. 
    The Canadian dollar has also been pressured by the market's
perception that the Bank of Canada is comfortable with letting
the loonie weaken in the hope that exports will benefit.
    "Unless that changes, we're probably still destined to see
Canada weaken a little bit," Mikolich said.
    The Canadian dollar was at C$1.1051 to the
greenback, or 90.49 U.S. cents, weaker than Friday's close of
C$1.1039, or 90.59 U.S. cents.
    The loonie could see a trading range of C$1.0970 to C$1.1120
this week, Mikolich said.
    Investors were also digesting comments last week from the
Bank of Canada's senior deputy governor that signaled a
willingness to ignore the role intense retail competition plays
in disinflation, saying that for monetary policy purposes this
is "good disinflation". 
    "It was seen somewhat dovishly," Mikolich said.
    The comments were "consistent with the tone for the bank,
which is no need to raise rates any time too soon and willing to
see inflation pick up a little bit before they even consider any
kind of tightening of monetary conditions," he added.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down half a
Canadian cent to yield 0.983 percent and the benchmark 10-year
 down 7-1/2 Canadian cents to yield 2.418 percent.
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