CANADA FX DEBT-C$ drops to lowest in more than a week after China data

Tue Apr 15, 2014 9:49am EDT

* Canadian dollar at C$1.1009 or 90.83 U.S. cents
    * Bond prices mostly higher across the maturity curve

    By Leah Schnurr
    TORONTO, April 15 (Reuters) - The Canadian dollar weakened
to its lowest level against the greenback in more than a week on
Tuesday, hit by concern over China's economic prospects and by
investor caution ahead of the Bank of Canada's latest policy
statement on Wednesday.
    With market focus on China, domestic economic data on
Tuesday failed to move the currency off session lows. Figures
showed Canadian manufacturing sales rose more than expected in
February, though January's figures were revised down.
 
    In China, data showed the country's money supply grew at the
weakest pace in more than a decade in March, suggesting
faltering economic momentum in the world's second-largest
economy. 
    "Everyone has been focused more recently on the risk of
deceleration going into the new year," said David Tulk, chief
Canada macro strategist at TD Securities in Toronto.
    "We've seen that in some of the manufacturing data in China
and this is just an extension of that, especially as it's
relevant for the generation of credit and it seems that that is
the driving force of a lot of Chinese growth."
    "The risks that do exist around that slowing down are
certainly a cause for concern and I think that's setting the
tone a bit more generally," Tulk said.
    The loonie is often sensitive to economic developments in
China, which is a major consumer of natural resources.
    The Canadian dollar was at C$1.1009 to the
greenback, or 90.83 U.S. cents, weaker than Monday's close of
C$1.0953, or 91.30 U.S. cents.
    The main event of the week will be the Bank of Canada's
policy decision due on Wednesday. While the central bank is
expected to hold rates steady at 1 percent, analysts will
scrutinize the statement and quarterly economic projections for
insight into the direction of monetary policy.
    The bank shifted gears last year when it struck a more
dovish tone, which has weighed on the loonie in recent months.
    The Canadian dollar has regained more than 2 percent since
hitting a 4-1/2 year low last month. That advance could leave
the currency vulnerable to a pullback even if the central bank
isn't overly dovish, analysts say.
     Canadian government bond prices were mostly higher across
the maturity curve, though the two-year was unchanged
to yield 1.052 percent. The benchmark 10-year was up
6 Canadian cents to yield 2.406 percent.

 (Editing by Peter Galloway)
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