CANADA FX DEBT-C$ weakens on consolidation after last week's gains

Mon Apr 7, 2014 9:53am EDT

* Canadian dollar at C$1.0997 or 90.93 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, April 7 (Reuters) - The Canadian dollar weakened
against the greenback on Monday as investors consolidated
positions, giving back some of the gains the currency made last
week after a strong domestic jobs report.
    In the backdrop was the provincial election in Quebec, with
polls closing at 8 p.m. EDT (2400 GMT) on Monday. But with the
governing separatist party behind in public opinion surveys, the
loonie was not expected to see much impact. 
    The Canadian dollar rose strongly at the end of last week
after data showed the domestic economy added twice as many jobs
as expected in March. 
    "We're really seeing a consolidation from Friday's price
action, that's mainly what's leading the slide in the loonie
this morning," said Scott Smith, senior market analyst at
Cambridge Mercantile Group in Calgary.
    Last week's data had pushed the loonie through C$1.10, which
had been a psychologically important support level for the U.S.
dollar-Canadian dollar pairing. That level will likely continue
to be a meaningful pivot for the currency, Smith said.
    "This level is going to be pretty important resistance on
the way back up if the U.S. dollar starts to gain more strength
here," he said.
    The Canadian dollar was at C$1.0997 to the
greenback, or 90.93 U.S. cents, weaker than Friday's close of
C$1.0981, or 91.07 U.S. cents.
    In Quebec, the latest opinion polls show the Liberals ahead
of the separatist Parti Quebecois, which has tamped down
concerns over a possible referendum on independence from Canada.
    In the past, Quebec has had two referendums on whether to
separate, both of which failed. The separatists lost the last
one in 1995, but by just over one percentage point.
    "Compared to the other two situations where Quebec had their
referendum and we saw the Canadian dollar weaken off quite
significantly, I don't think there's a big risk for this
election," Smith said.
    "Markets obviously don't like indecision, and they don't
like the possibility of potentially having a referendum, but
that's been played down over the last few weeks."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1 Canadian cent
to yield 1.082 percent, and the benchmark 10-year up
18 Canadian cents to yield 2.472 percent.

 (Editing by Peter Galloway)
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