CANADA FX DEBT-C$ hits 5-week low with focus on U.S. data

Tue Jul 29, 2014 9:59am EDT

* Canadian dollar at C$1.0817 or 92.45 U.S. cents
    * Bond yields drop, 10-yr at more than 1-yr low

    By Leah Schnurr
    TORONTO, July 29 (Reuters) - The Canadian dollar weakened to
touch its lowest level in more than five weeks against the
greenback on Tuesday, caught by a wave of favor for the U.S.
dollar that was spurred by optimism over U.S. economic data due
later in the week.
    While Canada has a busy economic calendar this week, with 
May economic growth and June producer prices on tap, the
market's main focus will be on the slew of U.S. data. It
includes July's unemployment report and the first look at
second-quarter economic growth, while a two-day Federal Reserve
meeting gets underway on Tuesday.  
    The greenback's push sent the loonie further into the C$1.08
area, dropping as low as C$1.0827 early in the day.
    "Everything against the U.S. dollar was driven lower very
quickly," said Greg Moore, senior currency strategist at Royal
Bank of Canada in Toronto. "It looks more dramatic given we've
been in such a tight range the past day and a half."
    "Part of it does reflect the fact that consensus seems to be
getting a little bit more optimistic on the outcome of various
U.S. events this week."
    The Canadian dollar was at C$1.0817 to the
greenback, or 92.45 U.S. cents, weaker than Monday's close of
C$1.0800, or 92.59 U.S. cents.
    After trading largely sideways for two weeks, the loonie
dropped sharply on Friday, pushing through some key technical
levels to break out of the range it had been in.
    The U.S. dollar-Canadian dollar pairing faces near-term
resistance at C$1.0835, which is its 200-day moving average, as
well as some trend resistance at C$1.0843, Moore said.
    Overall, Friday's move seems to have shifted the bias higher
for the pair, he added, to the detriment of the loonie.
    Canadian government bond yields were lower across the
maturity curve, mirroring a drop in U.S. Treasuries yields. The
yield on the benchmark Canadian 10-year fell to
2.105 percent, a more than one-year low .
    The two-year was up 1 Canadian cent to yield
1.081 percent.

 (Editing by Peter Galloway)
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