CANADA FX DEBT-C$ firms as U.S. data outweighs Ukraine tension

Mon May 5, 2014 4:39pm EDT

* Canadian dollar at C$1.0952 or 91.31 U.S. cents
    * Bond prices mostly lower across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, May 5 (Reuters) - The Canadian dollar firmed
against the greenback on Monday, overcoming early weakness as
better-than-expected U.S. economic data offset concerns about
the ongoing tension in Ukraine.
    Still, the loonie stuck to its recent range around C$1.10 to
the U.S. dollar. Analysts don't expect it to stray far from that
level until domestic economic reports on the trade balance and
labor market are released later in the week.
    Ukraine sent special forces into the southern port city of
Odessa following a weekend of violence that killed dozens.
Meanwhile, pro-Russian rebels shot down a Ukrainian helicopter
amid fighting near the eastern town of Slaviansk.
 
    The developments weighed on the loonie early in the day as
investors sought safety in the greenback. Market risk appetite
has waxed and waned in the past few months depending on whether
the Ukraine crisis has been seen as intensifying or dissipating.
    The currency shrugged off the session's initial weakness
after data showed growth in the large U.S. services sector
picked up in April, rising at the fastest pace in eight months.
 
    "What's good for the U.S. is good for Canada," said Rahim
Madhavji, president at KnightsbridgeFX.com in Toronto.
    "So, the loonie is really benefiting from strong data in the
U.S. and positive risk sentiment ... but it's still very close
to the C$1.10 range, which it has been for several weeks now."
    The Canadian dollar ended the North American
session at C$1.0952 to the greenback, or 91.31 U.S. cents,
stronger than Friday's close of C$1.0980, or 91.07 U.S. cents.
    Overnight, data showed activity in China's manufacturing
sector contracted for a fourth month in a row in April,
underscoring the view that China's economy has lost momentum.
 
    The loonie is often affected by data from China, which is
the world's second-largest economy and a major consumer of
natural resources. 
    The economic data at home this week will be watched for what
impact it may have on the direction of Bank of Canada monetary
policy. The central bank has taken a neutral stance since last
October and has flagged its concern about weak inflation and
exports.
    Among the major economic reports on tap this week are trade
balance numbers, which will be released on Tuesday, while the
labor market report will close out the week on Friday. 
    "The big thing people are watching for tomorrow are the
trade balance numbers," said Scott Smith, senior market analyst
at Cambridge Mercantile Group in Calgary.
    "They're going to be a big driver, with the Bank of Canada
focusing so much on export growth." 
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year off 1-1/2 Canadian
cents to yield 1.074 percent, and the benchmark 10-year
 down 18 Canadian cents to yield 2.372 percent.

 (Editing by Peter Galloway)
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