CANADA FX DEBT-C$ weaker as recent momentum slips

Fri Feb 14, 2014 4:39pm EST

* Canadian dollar at C$1.0983 or 91.05 U.S. cents
    * Loonie gains 0.5 pct on week; touches four-week high
    * Bond prices mixed across the maturity curve


    By Leah Schnurr and Alastair Sharp
    TORONTO, Feb 14 (Reuters) - The Canadian dollar pulled back
slightly against the greenback on Friday, breaking a recent
string of modest gains in which it had bounced up from last
month's 4-1/2 year lows.
    The loonie had a firmer tone after data overseas showed
growth in the euro zone economy picked up more than analysts
were expecting. 
    But at home data showed manufacturing sales dropped
unexpectedly in December, halting the Canadian dollar's early
gains. 
    With upcoming domestic data expected to provide further
evidence of slow growth and stagnant inflation, the currency's
upswing is likely to peter out, said Shaun Osborne, chief
currency strategist at TD Securities.
    "I don't think that anyone is outright bullish on the
Canadian dollar here," he said. 
    "(The data) does point to maybe more softness in the early
part of next week before we start to think seriously about the
retail sales and CPI numbers" later in the week, which Osborne
said could be weak.   
     The Canadian dollar ended the North American
session at C$1.0983 to the greenback, or 91.05 U.S. cents,
weaker than Thursday's close of C$1.0977, or 91.10 U.S. cents. 
    The currency earlier hit C$1.0940, its highest level in
nearly four weeks. It ended up gaining 0.5 percent on the week.
    After a sharp selloff in January, the Canadian dollar has
managed to regain about 1.5 percent since the start of February
with investors viewing the speed of its decline at the start of
the year as having been overdone.
    Still, the fundamentals that drove the loonie lower remain
in place, particularly the Bank of Canada's expressed concern
about weak inflation and the likelihood that the bank will keep
interest rates low for some time. Most analysts expect more
downside for the loonie.
     "We still think the medium-term trend over the next few
months is a weaker Canadian dollar," said Benjamin Reitzes,
senior economist at BMO Capital Markets in Toronto.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year up 1 Canadian cent
to yield 1.014 percent, and the benchmark 10-year 
down 5 Canadian cents to yield 2.467 percent.
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.