CANADA FX DEBT-C$ strengthens to near a two-month high

Tue Apr 8, 2014 9:46am EDT

* Canadian dollar at C$1.0928 or 91.51 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, April 8 (Reuters) - The Canadian dollar
strengthened against the greenback on Tuesday to hit its highest
level in nearly two months as investors were reassured by signs
of health in recent economic data, increasing risk appetite.
    Still, the loonie trimmed some gains after a round of
disappointing housing data on Tuesday morning. Housing starts in
Canada fell more than expected in March, while building permits
slumped in February.  
    In Quebec, the federalist Liberal Party won a majority
government in provincial elections, eliminating the threat of an
impending referendum on independence from Canada. 
    The election result was likely to reassure investors, though
the runup to Monday's vote had not had much impact on the
currency. 
    Since touching a 4-1/2 year low in late March, the loonie
has bounced higher. A robust employment report last week
propelled it through the C$1.10 level, which had represented
significant resistance.
    "Setting aside these housing numbers, the broader trend in
activity data and inflation data has been slightly better than
expected over the past couple months," said Greg Moore, senior
currency strategist at Royal Bank of Canada in Toronto.
    "Looking forward to the Bank of Canada meeting next week, it
suggests they're not going to have much evidence to continue
emphasizing the downside risk as much, which should be a
marginal positive for the Canadian dollar."
    The Canadian dollar was at C$1.0928 to the
greenback, or 91.51 U.S. cents, stronger than Monday's close of
C$1.0969, or 91.17 U.S. cents. The loonie rose as high as
C$1.0917, its highest level since mid-February.
    The currency is likely to see further gains heading into the
Bank of Canada's policy announcement on April 16 and potentially
in the weeks after, Moore said.
    "In the next couple weeks, we could probably dip down into
C$1.08 area," he said.    
    "Broadly speaking, we're looking at the low C$1.09s to
C$1.12 sideways trend to continue for the next few months."
    Canadian government bond prices were lower across the
maturity curve, with the two-year off half a Canadian
cent to yield 1.085 percent and the benchmark 10-year
 down 8 Canadian cents to yield 2.472 percent.

 (Editing by Peter Galloway)
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