CANADA FX DEBT-C$ pulls back from near 3-month high

Thu Apr 10, 2014 9:47am EDT

* Canadian dollar at C$1.0917 or 91.59 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, April 10 (Reuters) - The Canadian dollar weakened
against the greenback on Thursday, pulling back from a nearly
three-month high in the previous session as investors
consolidated positions after the currency's recent string of
gains.
    U.S. data that showed first time claims for jobless benefits
fell more than expected last week undercut the loonie as the
greenback trimmed losses that had been spurred by disappointment
over the contents of the minutes of the U.S. Federal Reserve's
March policy meeting. 
    Minutes from the March Fed meeting released on Wednesday
suggested interest rate hikes may not come as soon as some had
thought, and that helped to lift the loonie through key
technical levels. But the currency had retraced much of that
gain by Thursday morning. 
    "Yesterday there was a lot of talk that we breached
technical support in the low C$1.09s," said Mazen Issa, senior
Canada macro strategist at TD Securities in Toronto.
    "Once that move was well advanced, we saw some consolidation
and we're seeing U.S. dollar-Canadian dollar come back up
again."
    The Canadian dollar was at C$1.0917 to the
greenback, or 91.59 U.S. cents, weaker than Wednesday's close of
C$1.0872, or 91.98 U.S. cents.
    The loonie, which came under intense selling pressure
earlier in the year, has climbed about 3 percent since hitting a
4-1/2 year low in mid-March. Some signs of strength in the
domestic economy have boosted sentiment, prompting investors to
cover short positions.
    Issa said that shift in sentiment is not likely to last. 
    "That longer-term trend that we're expecting to unfold with
higher U.S. dollar-Canadian dollar is likely becoming
re-entrenched," he said.
    "It may not be as swift as we have seen it in the past. I
think ultimately we're still waiting for a major macro catalyst
to propel it upwards."
    With little on the domestic economic calendar in the coming
days, investors are turning their attention to the Bank of
Canada's policy-setting meeting next Wednesday. The central
bank's more dovish tone has hit the loonie hard in the last few
months and markets will be watching to see if its stance
changes. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1-1/2 Canadian
cents to yield 1.062 percent, and the benchmark 10-year
 up 10 Canadian cents to yield 2.455 percent.

 (Editing by Peter Galloway)
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