CANADA FX DEBT-C$ weakens as U.S. data boosts the greenback

Tue Aug 19, 2014 9:25am EDT

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

    By Leah Schnurr
    TORONTO, Aug 19 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday as encouraging economic data
south of the border prompted investors to pick up the U.S.
currency, to the detriment of the loonie.
    The Canadian dollar saw little benefit from renewed risk
appetite in other financial markets as concerns over
geopolitical tensions between Ukraine and Russia eased.
 
    Despite some intraday swings, the loonie has mostly moved
sideways since the end of July. While analysts expect the
currency could consolidate around the C$1.09 level for now, it
is likely to weaken further before long, partly due to an
improving U.S. economy.
    Data on Tuesday supported that view as housing starts and
building permits surged in July, while consumer prices rose only
modestly.  
    "The data that came out stateside - the housing data
particularly - was better than expected, and that's been one of
the weaker segments of the U.S. economy lately," said Don
Mikolich, executive director of foreign exchange sales at CIBC
World Markets in Toronto.
    The Canadian dollar was at C$1.0908 to the
greenback, or 91.68 U.S. cents, weaker than Monday's close of
C$1.0886, or 91.86 U.S. cents.
    The next economic catalyst for the Canadian dollar does not
come until Friday, when reports on inflation and retail sales
will be released. Investors will also be watching for any
monetary policy news that comes out of the annual gathering of
central bankers and economists in Jackson Hole, Wyoming, at the
end of the week.
    The range for the U.S. dollar-Canadian dollar has been well
anchored, said Mikolich, with the downside where the 100- and
200-day moving averages merge around C$1.0865 and C$1.0870, and
resistance around C$1.0910 and C$1.0935.
    "The backdrop certainly supports U.S. dollar higher, Canada
lower over that medium term," Mikolich said. "The Canadian data
is at least delaying any meaningful move higher (for the pair)
for the time being." 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1-1/2 Canadian
cents to yield 1.065 percent and the benchmark 10-year
 up 20 Canadian cents to yield 2.043 percent.

 (Editing by Lisa Von Ahn)
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