CANADA FX DEBT-C$ firms slightly after positive Canadian data

Thu May 15, 2014 4:30pm EDT

* Canadian dollar at C$1.0877 or 91.94 U.S. cents
    * Bond prices rise, 10-yr yield lowest in nearly a year

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, May 15 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Thursday after data showed
domestic manufacturing sales rose in March for the third month
in a row.
    Still, despite the gains, the currency stuck to its recent
trading range and analysts think it is likely to remain around
either side of C$1.10 against the U.S. unit in the near-term.
    Manufacturing sales rose by 0.4 percent, better than the 0.3
percent rise economists had been expecting. 
    The benefit to the loonie was mitigated as attention was
diverted by economic data out of the United States that mostly
pointed to a firming economy south of the border, analysts said.
 
    "The broader view on U.S. dollar-Canadian dollar is really
still that we're tracing out this wide neutral range for the
time being," said Greg Moore, senior currency strategist at
Royal Bank of Canada in Toronto.
    The Canadian dollar ended the North American
session at C$1.0877 to the greenback, or 91.94 U.S. cents,
slightly stronger than Wednesday's close of C$1.0882, or 91.89
U.S. cents.
    The loonie attempted to break out of its range last week and
climbed as far as the low C$1.08s but snapped back after an
unexpectedly weak employment report last Friday.
    "Looking on the technical side, I know there are some
signals that we could see it challenge that C$1.08 level, but we
went to it very briefly last week and it was pretty strongly
rejected," said Ken Wills, currency strategist and broker at
CanadianForex in Toronto.
    "To me (that) tells us we're going to need a big catalyst
for something like that to happen. It's not going to be just
technical news alone."
    The euro fell against the Canadian dollar after data showed
the euro zone economy grew much less than expected in the first
quarter. The data supported expectations the European Central
Bank will ease monetary policy at its June meeting and sent the
euro to C$1.4907. 
    The Canadian dollar has had a bigger divergence against some
of its other crosses, including the euro and sterling, which
could cause some stronger trends to emerge in the coming weeks
that could favor the loonie, said Moore.
    Canadian bond yields tumbled alongside their U.S.
counterparts. The yield on the Canadian benchmark 10-year
 fell to its lowest level in close to a year.
    The Canadian 10-year bond was up 27 Canadian
cents to yield 2.260 percent, its lowest level since mid-June of
last year, while the two-year was up 1.6 Canadian
cents to yield 1.037 percent.
    The action in bonds has not so far spilled over into the
foreign exchange market, though it could be a cause for caution,
analysts said.

 (Reporting by Leah Schnurr; Editing by Dan Grebler)
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