CANADA FX DEBT-C$ firms modestly, but sticks to a narrow range

Mon Mar 24, 2014 4:47pm EDT

* Canadian dollar at C$1.1195 or 89.33 U.S. cents
    * Bond prices mostly higher across the maturity curve

 (Recasts with currency strengthening, adds details, quote,
updates prices)
    By Leah Schnurr
    TORONTO, March 24 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Monday, consolidating after
recent declines, but a lack of domestic data this week kept the
currency in a narrow trading range.
    Still, the loonie was able to shrug off early weakness that
was spurred by news that manufacturing activity in China
contracted in the first quarter.
    An index of manufacturing in China fell to an eight-month
low in March. The index has shown contraction since January amid
a string of other weak economic indicators from China this year.
 
    But markets shrugged off the data on speculation that the
weakness may prompt China's central bank to opt for further
stimulus measures. The Canadian dollar is sensitive to economic
developments in China, which is a major consumer of natural
resources.
    "Trading today has been very listless. We've really been
bouncing around just above C$1.12 and just below C$1.12," said
Scott Smith, senior market analyst at Cambridge Mercantile Group
in Calgary.
    The Canadian dollar ended the North American
session at C$1.1195 to the greenback, or 89.33 U.S. cents,
slightly stronger than Friday's close of C$1.1210, or 89.21 U.S.
cents.
    More dovish-than-expected comments from Bank of Canada
Governor Stephen Poloz hit the Canadian dollar last week in
combination with U.S. Federal Reserve musings about a
potentially faster timetable for eventually raising interest
rates. The force of the two factors pushed the loonie to a 4-1/2
year low.
    With no major Canadian economic data on the calendar this
week, investors will focus on bigger-picture themes, as well as
U.S. data, said Don Mikolich, executive director of foreign
exchange sales at CIBC World Markets in Toronto.
    He added that while the C$1.1250 to C$1.13 area will be the
next psychologically important level to watch for, there may not
be any domestic factors this week that would push the loonie to
those lows.
    U.S. data on the docket this week include a number of
reports on the housing sector, as well as the final reading for
fourth-quarter growth. 
    "The American data will give us an indication on the length
of time between when quantitative easing winds down and when
short-term rates start to rise," Smith said.
    If the data comes in more robust than expected, that will
likely drive the U.S. dollar higher to the detriment of the
loonie, he said.
    Canadian government bond prices were mostly higher across
the maturity curve, though the two-year was off 0.2
Canadian cent to yield 1.073 percent. The benchmark 10-year
 was up 28 Canadian cents to yield 2.455 percent.

 (Editing by Peter Galloway)
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