CANADA FX DEBT-C$ hurt by softer commodity prices on China growth concerns

Wed Mar 12, 2014 4:56pm EDT

* Canadian dollar at C$1.1116 or 89.96 U.S. cents
    * China, Ukraine feature amid dearth of data
    * Bond prices mostly rise across the maturity curve


    By Solarina Ho and Alastair Sharp
    TORONTO, March 12 (Reuters) - The Canadian dollar softened
slightly versus its U.S. counterpart on Wednesday as commodity
prices slid on worries over slowing growth in China, the world's
second-largest economy.
    The Ukraine crisis also pressured the loonie, as Canada's
currency is colloquially known, although it is currently a
peripheral issue.
    Canada has had little in the way of domestic data and its
central bank appears unable to move from a neutral stance,
leaving the currency unlikely to weaken much more soon, said
Shaun Osborne, TD Securities' chief currency strategist. 
    "It's not that things are great in Canada, it's just that
they haven't deteriorated significantly," he said.
    He said inflation and retail sales data due next week could
weaken the currency if they come in weaker than expected.
    Investors are also 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 on worries about Chinese demand, but rebounded somewhat
on Wednesday.  
    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 of 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."
    The Canadian dollar ended the session at C$1.1116
to the greenback, or 89.96 U.S. cents, weaker than Tuesday's
close of C$1.1103, or 90.07 U.S. cents.
    The Canadian dollar, which underperformed most major
currency counterparts, was expected to trade between C$1.1050
and C$1.1170 in the short-term, Mikolich said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year bond up 2.5
Canadian cents to yield 1.022 percent and the benchmark 10-year
 was up 33 Canadian cents to yield 2.452 percent.
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