CANADA FX DEBT-C$ weakens, but sticks to range ahead of data

Wed May 21, 2014 4:43pm EDT

* Canadian dollar at C$1.0915 or 91.62 U.S. cents
    * Bond prices lower across the maturity curve

 (Adds details on Fed minutes, quotes, and updates prices)
    By Leah Schnurr
    TORONTO, May 21 (Reuters) - The Canadian dollar weakened
against the greenback on Wednesday but clung to its recent
trading range as investors looked ahead to key domestic economic
data reports due for release later in the week.
    So far in May, the Canadian dollar has largely traded
sideways as the market has weighed modestly improving economic
data against the Bank of Canada's continuation of its neutral
policy stance.
    Figures for retail sales for March and inflation for April
will be released on Thursday and Friday, respectively.
    "We certainly have consolidated within a range, so we're
bouncing back and forth," said David Tulk, chief Canada macro
strategist at TD Securities in Toronto.
    "From that perspective, we'll look to retail sales tomorrow
to maybe break out of some of that very tight range, but even
sitting at C$1.0912 right now, we're probably only going to see
something up toward maybe C$1.10 or so if we get a really
disappointing retail sales print."
    TD expects retail sales to have dipped 0.1 percent on the
month, weaker than the consensus forecast for a 0.3 percent
gain. 
    The Canadian dollar ended the North American
session at C$1.0915 to the greenback, or 91.62 U.S. cents,
weaker than Tuesday's close of C$1.0899, or 91.75 U.S. cents.
    Favorable momentum for the U.S. dollar across currencies
also helped to push the loonie lower, said Ken Wills, currency
strategist and broker at CanadianForex in Toronto.
     A close above C$1.0930 would have suggested that the loonie
is starting to break out of its recent range, said Wills, though
the currency may get a chance to grind lower with Thursday's
retail sales.
    "If we're lacking any shine on those numbers, if they come
in as expected or below expectations - which is where my hunch
would be - it should put some pressure on the Canadian dollar,"
he said.
    Investors were also focused on monetary policy south of the
border as the minutes from the U.S. Federal Reserve's most
recent meeting showed policymakers have begun to lay the
groundwork for an eventual retreat from the Fed's
ultra-accommodative policy. 
    The Fed has been gradually winding down the massive
bond-purchase program that it undertook to boost the economy.
The minutes offered few surprises for investors, however, and
the loonie's reaction was muted.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 1.2 Canadian
cents to yield 1.050 percent and the benchmark 10-year
 down 19 Canadian cents to yield 2.302 percent.

 (Editing by Peter Galloway)
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