CANADA FX DEBT-C$ rebounds from recent weakness; data in focus

Thu Aug 21, 2014 4:24pm EDT

* Canadian dollar at C$1.0945, or 91.37 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details on trading range, analyst quotes, outlook for
Yellen at Jackson hole, updates prices)
    By Leah Schnurr
    TORONTO, Aug 21 (Reuters) - The Canadian dollar firmed
against the greenback on Thursday, rebounding after a nearly 1
percent drop over the last two days, ahead of some key domestic
economic data due at the end of the week.
    Concerns about the prospects for global growth hit the
loonie overnight after data showed business growth in China and
Europe slowed in August. The worries took the Canadian dollar to
a nearly two-week low in earlier trading before it was able to
claw back some gains. 
    Although the loonie has made some sizeable intraday moves in
recent weeks, it has largely stayed within a trading range.
Ongoing favor for the greenback is expected to continue to weigh
on the Canadian dollar as the economy south of the border picks
up. Analysts are watching C$1.10 as the next major resistance
level.
    The Canadian dollar was taking a bit of a breather after its
recent selloff, said Scott Smith, senior market analyst at
Cambridge Mercantile Group in Calgary
    "The U.S. dollar has rallied pretty strongly over the last
three to four sessions, so I think we're seeing a bit of a
breather and a little bit of position-squaring ahead of a big
risk day tomorrow," Smith said.
    The Canadian dollar ended the North American
session at C$1.0945 to the greenback, or 91.37 U.S. cents,
stronger than Wednesday's close of C$1.0971, or 91.15 U.S.
cents.
    Investors were turning their attention toward Canadian
inflation and retail sales reports that will be released on
Friday. With a quiet economic calendar at home, the reports will
be the main domestic events of the week.
    Focus was also on the start of the annual gathering of
economists and policymakers in Jackson Hole, Wyoming, with
Federal Reserve Chair Janet Yellen scheduled to speak on Friday.
    Her speech on labor markets comes on the heels of minutes
released earlier this week that hinted the recovery in the jobs
market could lead the Fed to raise rates earlier than it had
been anticipating. 
    Looking at the gains the U.S. dollar has seen this week, "it
does suggest that the market is gearing up for something a
little bit less dovish from Yellen," said Greg Moore, senior
currency strategist at Royal Bank of Canada in Toronto.
    "That does set the bar a little higher than it was maybe a
week ago for how much more hawkish or less dovish she has to be
to actually get more traction in the U.S. dollar," Moore said.
    The combination of Canadian data followed by Yellen's speech
could lead to some choppy moves in the U.S. dollar-Canadian
dollar pairing, he said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up half a Canadian
cent to yield 1.089 percent and the benchmark 10-year
 up 14 Canadian cents to yield 2.085 percent.

 (Editing by Andrew Hay)
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