CANADA FX DEBT-C$ weakens after wholesale trade data disappoints

Tue May 20, 2014 9:42am EDT

* Canadian dollar at C$1.0903 or 91.72 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, May 20 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday after data showed an unexpected
pullback in domestic wholesale trade in March.
    The decline brought the loonie to the key C$1.09 area, and
investors will be watching to see if the currency now will break
out of its recent trading range.
    Wholesale trade declined by 0.4 percent in March, hurt in
part by weaker motor vehicle sales. The loonie fell to a session
low immediately after the data was released. 
    A drop in the Australian dollar also weighed on the
Canadian dollar, said Scott Smith, senior market analyst at
Cambridge Mercantile Group in Calgary.
    The Australian dollar was hit after a central banker said
capital flows into the country are likely to slow. The Reserve
Bank of Australia also released minutes from its last meeting
that showed board members thought the current low interest rate
environment would be appropriate for some time. 
 
    The loonie often moves alongside the Aussie as both
considered commodity-linked currencies. 
    "It's almost a trifecta of little things that have piled up
overnight and this morning that have led to some notable loonie
weakness today," Smith said.
    The Canadian dollar was at C$1.0903 to the
greenback, or 91.72 U.S. cents, weaker than Friday's official
close of C$1.0857, or 92.11 U.S. cents. Many market participants
were away for Cansda's Victoria Day holiday on Monday.
    More domestic economic releases later in the week, including
retail sales and inflation data, could prove to be catalysts
that push the loonie lower as it tests the C$1.09 level, Smith
said.
    "If we do manage to break through that on some sustained
selling pressure, and we see a run of the stops that are in the
low C$1.09s, then I think we could get to C$1.0970 pretty
quick," he said.
    "That being said, we've tried over the course of the last
week and a half to meaningfully break through this level and
it's been fairly well defended."
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 1-1/2 Canadian
cents to yield 1.047 percent, and the benchmark 10-year
 down 21 Canadian cents to yield 2.287 percent.

 (Editing by Peter Galloway)
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