CANADA FX DEBT-C$ hurt by softer commodity prices as China weighs

Wed Mar 12, 2014 9:57am EDT

* Canadian dollar at C$C$1.1145  or 89.73 U.S. cents
    * Bond prices mostly rise across the maturity curve

    By Solarina Ho
    TORONTO, March 12 (Reuters) - The Canadian dollar softened
against its U.S. counterpart on Wednesday as commodity prices
slid on worries over slowing growth in China, the world's
second-largest economy.
    Investors are awaiting fresh economic data from China,
including industrial output, retail sales and urban investment
for further clarity on the direction of the Chinese economy, a
major market for Canadian raw materials exports.
     Copper tumbled to the lowest levels in over three years on
Tuesday as investors and speculators intensified selling because
of worries about Chinese demand and liquidation of inventories
used for finance deals.  
    Crude prices fell amid worries that fuel demand could shrink
from the world's two biggest oil consumers, China and the United
States. U.S. data showed crude stocks rose more than forecast,
signaling a slowdown in demand as the weather improved. 
    The Canadian dollar is often sensitive to commodity prices
given the country exports much of its oil, mineral and food
production.    
    "A lot of the slowing growth numbers (in China) is leading
to the drop in commodity prices. That's one of the things that's
set a bit of a negative for the Canadian dollar," said Don
Mikolich, executive director, foreign exchange sales at CIBC
World Markets.
    "We're still kind of suffering a little bit from the flight
to safety over the Ukraine crisis. That will keep us pinned down
a little bit as well."
    Around 9:47 a.m. (1347 GMT), the Canadian dollar 
was at C$1.1145 to the greenback, or 89.73 U.S. cents, weaker
than Tuesday's close of C$1.1103, or 90.07 U.S. cents.
    The Canadian dollar, which was underperforming all other
major currency counterparts except for the Australian dollar
, was expected to trade between C$1.1050 and C$1.1170
in the short-term, Mikolich said.
    The commodities-linked Australian dollar is even more
sensitive to sentiment on China. 
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year bond up 1.5
Canadian cents to yield 1.027 percent and the benchmark 10-year
 was up 30 Canadian cents to yield 2.455 percent.
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