CANADA FX DEBT-C$ strengthens as Canada housing starts seen lifting GDP

Mon Jun 9, 2014 4:40pm EDT

* Canadian dollar at C$1.0908 or 91.68 U.S. cents
    * Bond prices lower across the maturity curve

    By Solarina Ho
    TORONTO, June 9 (Reuters) - The Canadian dollar firmed
against its U.S. counterpart and outperformed other major
currencies on Monday after data showed Canadian housing starts
came in ahead of expectations in May.
    A report from Canada Mortgage and Housing Corp showed
seasonally adjusted annualized housing starts rose to 198,324
last month, while April was revised higher to 196,687 units.
Analysts had forecast 185,000 for May.
    The data suggested housing will contribute to economic
growth in the second quarter after an unusually frigid winter
put a chill on construction. 
    "Most of (the Canadian dollar) strength came in tandem with
the stronger-than-expected housing starts number which, a
combination of that and the slight revision to last month, would
suggest that the housing market is providing more of a lift to
GDP than anyone expected," said Camilla Sutton, chief currency
strategist at Scotiabank.
    "We are trading up as well as Aussie, which suggests it's
somewhat of a global growth, positive move, and that's just the
ongoing theme of the day."
    The Canadian dollar closed at C$1.0908 to the
greenback, or 91.68 U.S. cents, up from Friday's close of
C$1.0930, or 91.49 U.S. cents.
    Trading this week may be uneventful, with the Bank of
Canada's semi-annual Financial System Review on Thursday and a
press conference by Governor Stephen Poloz following the release
of the review being the highlights.
    "This is going to be a quiet week overall for every market,
currency markets as well, after pretty solid action last week,"
said Benjamin Reitzes, senior economist and foreign exchange
strategist at BMO capital Markets.
    Reitzes noted that if yields, particularly U.S. Treasury
yields, continue to rise, it could weigh on the Canadian dollar
as higher U.S. yields attract flow to the greenback.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 1.5 Canadian
cents to yield 1.070 percent, and the benchmark 10-year
 off 3 Canadian cents to yield 2.325 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)
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