CANADA FX DEBT-C$ weakens modestly, hovering around key level

Tue Apr 22, 2014 4:31pm EDT

* Canadian dollar at C$1.1028 or 90.68 U.S. cents
    * Bond prices mostly higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, April 22 (Reuters) - The Canadian dollar weakened
modestly against the greenback on Tuesday as traders found few
compelling reasons to drive the loonie in a significant
direction, even as data showed domestic wholesale trade rose
more than expected in February.
    Strength in recent Canadian economic data had helped the
loonie recover from the 4-1/2-year low it hit in March, but that
rally has run out of steam in the last couple of weeks, leaving
the currency moving sideways as it hovers around the technically
important C$1.10 level.
    Tuesday's data was similarly unable to give the Canadian
dollar a lift. Canadian wholesale trade rose 1.1 percent in
February, surpassing expectations for 0.7 percent, as sales rose
in all subsectors. After firming slightly earlier in the day,
the loonie eventually gave up its gains. 
    "We have had this string of better-than-expected data, but
on the other side, we also have a central bank who is quite
neutral in its tone, and we also have the U.S. outperforming
Canada," said Camilla Sutton, chief currency strategist at
Scotiabank in Toronto.
    "The end result is that I think Canada is stuck on either
side of C$1.10, waiting for a catalyst that would have the
central bank shift its tone, have the growth outlook improve
even more, or have a shift in global growth." 
    The Bank of Canada said last week that an interest rate cut
was still a possibility, even as the central bank forecast
inflation will pick up speed this year. 
    The Canadian dollar ended the North American
session at C$1.1028 to the greenback, or 90.68 U.S. cents,
slightly weaker than Monday's close of C$1.1015, or 90.79 U.S.
cents.
    Despite some large swings in the currency this year, the
loonie has essentially traded sideways from where it was at the
end of January, said Greg Moore, senior currency strategist at
Royal Bank of Canada in Toronto.
    "I think for the time being, there aren't any clear signals
that we'll be moving out of that very broad sideways range,"
said Moore.
     "A lot of the Canadian dollar bearish story and
developments have been priced in at this point and we need to
see something new before we start to see a stronger directional
trend."
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year up half a
Canadian cent to yield 1.070 percent and the benchmark 10-year
 up 2 Canadian cents to yield 2.448 percent. 

 (Editing by Chris Reese)
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