CANADA FX DEBT-C$ steady; focus turns to retail sales

Tue Jul 22, 2014 4:29pm EDT

* Canadian dollar at C$1.0736 or 93.14 U.S. cents
    * Bond prices rise, 10-year yield at more than 1-year low

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, July 22 (Reuters) - The Canadian dollar was little
changed against the greenback on Tuesday as a lack of domestic
economic catalysts left the currency churning in a tight range,
despite the re-emergence of some cautious risk appetite in
global markets.
    Data that showed the U.S. consumer price index increased 0.3
percent in June pressured the loonie earlier in the day as it
helped lift the U.S. dollar, but the impact proved to be short
lived. 
    "That was the initial catalyst and then really the market,
in the absence of a material move, just unwound the short-term
profits and went back to a neutral range, mirroring that of
yesterday," said Gareth Sylvester, director at Klarity FX in San
Francisco.
    Sentiment in financial markets around the world turned more
optimistic on Tuesday after a spike in tensions in Ukraine and
the Middle East on Monday had sent investors looking for safe
havens. 
    Still, markets were not yet back to a fully risk-on mood,
with U.S. Treasuries yields falling. That helped drag the yield
on Canadian 10-year bonds down to their lowest in
over a year.
    Investors were keeping a close eye on geopolitical risks
after European Union foreign ministers threatened Russia with
harsher sanctions over Ukraine, and Israel said no ceasefire was
near as it hit targets across the Gaza Strip. 
 
    The Canadian dollar ended the North American
session at C$1.0736 to the greenback, or 93.14 U.S. cents,
slightly weaker than Monday's close of C$1.0730, or 93.20 U.S.
cents.
    In a quiet week for Canadian economic data, Wednesday's
report on retail sales will be in focus. Sales are forecast to
have risen by 0.6 percent.
    The loonie rallied 1.6 percent through June but has given
back about a half a percent so far this month. A disappointing
jobs report and a central bank that has firmly retained its
neutral stance have helped to sap some of the momentum from the
currency.
    Sylvester expects to see a stronger U.S. dollar-Canadian
dollar in the medium-term, meaning a weaker loonie.
    "Getting back up to the C$1.09, C$1.10 areas is realistic
over the next few weeks and months," he said. "In the near term,
we just need to see a break and close above the C$1.0820 area to
really set this market up for the next leg higher."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1 Canadian cent
to yield 1.080 percent. The benchmark 10-year rose 12 Canadian
cents, sending the yield to 2.123 percent, its lowest level
since last June.
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