CANADA FX DEBT-C$ pulls back after disappointing monthly GDP

Mon Jun 30, 2014 4:23pm EDT

* Canadian dollar at C$1.0670 or 93.72 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, June 30 (Reuters) - The Canadian dollar weakened
modestly against the greenback on Monday, pulling back from last
week's near six-month high as data showed the domestic economy
grew at a slower pace than expected in April.
    Still, the loonie was on track to rack up its best month
since September following a rally that was partly fueled by
surprisingly strong inflation figures that prompted markets to
speculate whether the Bank of Canada will have to change its
monetary stance.
    The Canadian dollar was also able to recover some of
Monday's earlier losses as it benefited from broad U.S. dollar
weakness.
    Data on Monday showed economic growth came in at 0.1 percent
in April, below expectations for 0.2 percent, as oil and gas
production fell. The Canadian dollar fell to a session low
shortly after the report. 
    "It reconfirms the moderating growth rate in Canada," said  
  Scott Smith, senior market analyst at Cambridge Mercantile
Group in Calgary.
    While Canadian growth in the first quarter of the year was
disappointingly slow, it still held up better than growth in the
United States, where the economy contracted.
    "With the weakness in the first quarter from the U.S., we'll
probably see a bit of flow through, so our second quarter will
be a little more moderate and we'll probably see the U.S.
outperform Canada on an overall basis in the second quarter,"
said Smith.
    Weaker oil prices also hurt the loonie as worries about a
disruption to oil output in Iraq faded, said Smith.
    The Canadian dollar ended the North American
session at C$1.0670 to the greenback, or 93.72 U.S. cents,
weaker than Friday's close of C$1.0661, or 93.80 U.S. cents.
    On the last trading day of June, the loonie was up 1.6
percent for the month. For the quarter, the currency has fared
even better, up 3.6 percent.
    With Canadian markets closed on Tuesday and U.S. markets
closed on Friday, the Canadian dollar will likely stick to a
trading range this week, even with a handful of economic reports
on tap, said Don Mikolich, executive director of foreign
exchange sales at CIBC World Markets in Toronto.
    The C$1.0637 area could act as a support level for the U.S.
dollar-Canadian dollar pairing, said Mikolich.
    "It feels like it's still a bit of a stretch to move below
those six-month highs on the Canadian dollar," he said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 3-1/2 Canadian
cents to yield 1.102 percent and the benchmark 10-year
 was up 14 Canadian cents to yield 2.236 percent.

 (Editing by Meredith Mazzilli)
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