CANADA FX DEBT-C$ recovers to touch six-month high

Thu Jul 3, 2014 4:31pm EDT

* Canadian dollar at C$1.0639 or 93.99 U.S. cents
    * Bond prices mostly lower across the maturity curve

 (Recasts with the Canadian dollar turning higher, adds details,
quotes, updates prices)
    By Leah Schnurr
    TORONTO, July 3 (Reuters) - The Canadian dollar strengthened
against the greenback in a see-saw session on Thursday,
extending its rally to a six-month high despite robust U.S. jobs
figures that had taken the loonie lower earlier in the day.
    The Canadian dollar also got some help from data that showed
that a resurgence in Canadian exports helped narrow the
country's trade deficit to C$152 million ($143 million) in May.
 
    That report had been eclipsed earlier in the day by data
that showed the U.S. economy added a greater-than-expected
288,000 jobs last month, boosting the U.S. dollar to the
detriment of the loonie. 
    But the Canadian dollar was able to resume its upward climb
by midmorning, carried by the momentum that had led it to a 1.6
percent gain in June.
    "I think the Canadian dollar is clinging on to recent gains
at the moment," said Lennon Sweeting, corporate dealer at
USForex in San Francisco. But Sweeting said he doesn't expect
that trend to persist.
    "In terms of economic data, you would definitely ascertain
that the U.S. dollar-Canadian dollar should be a little higher
than what it is at the moment," he said. "Although that bump
this morning was short-lived, I think over the next couple weeks
we'll see the U.S. dollar-Canadian dollar trend higher." .    
    The Canadian dollar ended the North American
session at C$1.0639 to the greenback, or 93.99 U.S. cents,
stronger than Wednesday's close of C$1.0667, or 93.75 U.S.
cents. The loonie's session high was C$1.0620, its highest level
since early January.
    The Canadian dollar rallied in much of June, fueled in part
by surprisingly strong domestic inflation figures. Investors are
now turning their attention to how the Bank of Canada might
address those figures in its monetary policy statement in
mid-July.
    "If there's any pending weakness coming in the Canadian
dollar, it would be for the Bank of Canada to try to replace
their concerns about inflation with something else and see how
that sits with the foreign exchange market," said Mark Chandler,
head of Canadian fixed income and currency strategy at Royal
Bank of Canada in Toronto.
    Canadian government bond prices were mostly lower across the
maturity curve, though the two-year was unchanged to
yield 1.135 percent. The benchmark 10-year was off 4
Canadian cents to yield 2.326 percent.
    Moody's Investors Service late on Wednesday assigned a
"negative" outlook to Ontario's debt and issuer ratings, revised
from "stable", but at the same time affirmed its Aa2 ratings. 
    Moody's said the change in outlook reflects the rating
agency's assessment of the risks surrounding the province's
ability to meet its medium-term fiscal targets. The yield on
10-year Ontario bonds rose slightly, in line with
Canadian government bond yields, to 3.156
percent. 

 (Editing by Peter Galloway)
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