CANADA FX DEBT-C$ eases modestly as Chinese trade data drags

Mon Mar 10, 2014 5:14pm EDT

* Canadian dollar at C$C$1.1101 or 90.08 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, March 10 (Reuters) - The Canadian dollar was
marginally softer against the U.S. dollar on Monday as Chinese
exports unexpectedly sank in February, sparking fears about the
outlook for China, the world's second-largest economy and one of
the biggest buyer of commodities.
    Chinese exports fell 18 percent from a year ago, swinging
the trade balance into deficit. The Lunar New Year holiday was
blamed for the sharp decline, though the data followed a series
of factory surveys this year that hint at softer demand in China
and abroad. 
    Falling oil prices, hit in part by the Chinese data, also
pressured the commodities-sensitive currency. 
    "This weakness is probably coming from marginally lower
commodity prices on the day," said Charles St-Arnaud, Canadian
economist and currency strategist in New York with Nomura
Securities International.
     The Canadian dollar, which was underperforming
most other key currencies, finished Monday at C$1.1101 to the
greenback, or 90.08 U.S. cents, weaker than Friday's close of
C$1.1090, or 90.17 U.S. cents.
    It eased alongside its sister currency, the Australian
dollar, which is even more closely tied to the health of the
economy in China. But the move was marginal relative to Friday's
retreat on the disappointing Canadian jobs data. 
    "It's still relatively small movements," said Mark Chandler,
head of Canadian fixed income and currency strategy at Royal
Bank of Canada, noting the dearth of domestic data.
    The only significant domestic data in Canada on Monday was
housing starts, which rose more than expected in February, but
did little to change expectations that the Canadian housing
market will cool in 2014. 
    With little in the way of domestic data this week, St-Arnaud
expects the currency's moves to remain limited. U.S. retail
sales, which fell unexpectedly in January amid unseasonably cold
weather, could be one potential driver later this week.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year bond up 1.7
Canadian cents to yield 1.043 percent and the benchmark 10-year
 up 22 Canadian cents to yield of 2.498 percent.
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