CANADA FX DEBT-C$ takes a breather from week's rally

Fri Mar 28, 2014 4:27pm EDT

* Canadian dollar at C$1.1060 or 90.42 U.S. cents
    * Bond prices mostly higher across maturity curve

    By Leah Schnurr
    TORONTO, March 28 (Reuters) - The Canadian dollar softened
against the greenback on Friday, taking a breather after this
week's strong recovery from the multi-year lows it hit last
week, while a lack of domestic economic data provided few
catalysts for trade.
    The loonie fell to a 4-1/2-year low last week, pressured by
the Bank of Canada saying it could not rule out an interest rate
cut and by a potentially faster timetable for raising rates in
the United States.
    But the currency was able to recoup all those losses this
week and some analysts believe the selloff was likely overdone,
with Friday's moves a predictable retracement after the rally.  
    "The lack of follow through (is) telling us those positions
were a little bit ahead of themselves," said Brad Schruder,
director of foreign exchange at BMO Capital Markets.
    "We're now slowly easing back to let's call it a fair value
for USD/CAD, which is probably somewhere around C$1.0950 an
C$1.1150."
    The Canadian dollar, which was underperforming most
of its currency counterparts, finished Friday's session at
C$1.1060 to the greenback, or 90.42 U.S. cents. This was weaker
than Thursday's close of C$1.1032, or 90.65 U.S. cents. 
    Earlier, the currency rose to touch a three-week high of
C$1.1001. For the week, the U.S. dollar has depreciated about
1.4 percent against the loonie.
    After this week's recovery in the loonie, the U.S.
dollar-Canadian dollar pairing was starting to look cheap, said
Shaun Osborne, chief currency strategist at TD Securities in
Toronto.
    "I'm not sure we're going to go that much lower for now,
this is a pretty decent correction in the overall scheme of
things," he said.
    Investors will return next week to a busier calendar of
economic data with monthly domestic gross domestic product
figures on tap on Monday. Through the week, markets will also
take in other reports, culminating in the monthly employment
data from Canada and the United States next Friday.
    "I think it would be fair to say everybody can discount any
'weather effects' - so we'll start to see some normalization, or
at least a lack of excuses around why the data is the way it
is," said Schruder. "The Canadian economy isn't as bad as these
global Canadian dollar bears would have you believe."
    Schruder expects the loonie to trade between C$1.0925 and
C$1.1175 next week, ahead of job figures, barring any surprises.
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year down 2 Canadian
cents to yield 1.076 percent. The benchmark 10-year 
bond slipped 7 Canadian cents to yield 2.443 percent.

 (Additional reporting by Solarina Ho; Editing by Peter Galloway
and James Dalgleish)
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