CANADA FX DEBT-C$ pulls back from one-month high as data weighs

Wed May 7, 2014 4:28pm EDT

* Canadian dollar at C$1.0894 or 91.79 U.S. cents
    * Bond prices lower across the maturity curve

 (Adds details on market activity, quotes, updates prices)
    By Leah Schnurr
    TORONTO, May 7 (Reuters) - The Canadian dollar weakened
modestly against the greenback on Wednesday, easing from the
previous session's nearly one-month high as data showed Canadian
building permits fell unexpectedly in March.
    The market had little reaction to comments from U.S. Federal
Reserve Chair Janet Yellen as they offered few surprises. Yellen
said the U.S. economy was still in need of lots of support given
the considerable slack in the labor market. 
    The Canadian dollar took a breather after Tuesday's selloff
of the U.S. dollar helped push the loonie strongly higher and
out of its recent trading range. 
    The currency had been comfortable around either side of the
key C$1.10 level in recent weeks, but Tuesday's action pushed it
into the high C$1.08s.
    "We've more narrowly defined ourselves a bit lower right
now," said Don Mikolich, executive director of foreign exchange
sales at CIBC World Markets in Toronto.
    The U.S. dollar-Canadian dollar pairing could see support at
the C$1.0860 and C$1.0840 levels, Mikolich said, while the top
could be limited at C$1.0960. 
    The loonie weakened after data showed the value of building
permits issued in Canada fell 3 percent in March, though
residential permits inched higher. 
    The report could temper expectations for housing starts data
due on Thursday, though it can often take two or three months
for the impact of building permits to be seen in the starts
figures, Mikolich said.
    The Canadian dollar ended the North American
session at C$1.0894 to the greenback, or 91.79 U.S. cents,
weaker than Tuesday's close of C$1.0879, or 91.92 U.S. cents.
    In the short term, the risk is that the loonie will weaken
as U.S. dollars should attract buyers at these levels, said Dean
Popplewell, chief currency strategist at OANDA in Toronto.
    "From a Canadian perspective, straddling this C$1.09 level,
there's still a good appetite to own U.S. dollars," Popplewell
said. "Obviously the market has taken somewhat of a breather
after the last couple days. For the Canadian dollar to gather
momentum from these levels would be relatively premature."
    Canadian government bond prices were lower across the
maturity curve, with the two-year off half a Canadian
cent to yield 1.074 percent, and the benchmark 10-year
 down 7 Canadian cents to yield 2.382 percent.

 (Editing by Peter Galloway)
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