CANADA FX DEBT-C$ little changed as investors consolidate gains

Thu Feb 13, 2014 9:25am EST

* Canadian dollar at C$1.1010 or 90.83 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Feb 13 (Reuters) - The Canadian dollar was little
changed against the greenback on Thursday as investors
consolidated gains seen since the start of the month, leaving
the currency without much direction.
    One of the few domestic economic reports released this week
showed new home prices in Canada rose 0.1 percent in December,
as expected. Data south of the border had more of an impact on
the Canadian dollar, as an unexpected drop in U.S. retail sales
for January took the currency slightly lower. 
 
    Volume could be lighter with some traders away from their
desks as an intensifying winter storm hit the U.S. east coast.
U.S. lawmakers postponed a hearing with Federal Reserve Chair
Janet Yellen that had been scheduled for Thursday
morning.  
    After a sharp sell-off in January that took the Canadian
dollar to 4-1/2-year lows, the currency has bounced back to
recoup about 1 percent since the start of February. 
    "The move was so extreme and so violent, we have seen a
little bit of a retracement from there," said Camilla Sutton,
chief currency strategist at Scotiabank in Toronto.
    Nonetheless, the fundamentals that drove the loonie lower at
the start of the year remain in place, particularly a Bank of
Canada that is concerned about the weak inflation environment
and is likely to keep rates low for some time. Most analysts
expect the loonie will come under renewed pressure as the year
progresses.
    "Certainly things have turned slightly more favorable for
the Canadian dollar in February, but it doesn't erase it. The
overarching driver of weakness has been the Bank of Canada, in
an environment where inflation data is particularly important."
    The Canadian dollar was at C$1.1008 to the
greenback, or 90.84 U.S. cents, slightly weaker than Wednesday's
close of C$1.0997, or 90.93 U.S. cents.
    The C$1.0967 mark will be an important technical level, as a
break through that level would suggest an accelerated downside
in the U.S. dollar-Canadian dollar pairing, but a failure to
crack it could provide support, said Sutton.
    Canadian government bond prices were up across the maturity
curve, with the two-year up 3-1/2 Canadian cents to
yield 1.017 percent and the benchmark 10-year up 30
Canadian cents to yield 2.451 percent.
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