CANADA FX DEBT-C$ flat as inflation offsets retail sales data

Fri Aug 22, 2014 4:19pm EDT

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

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Aug 22 (Reuters) - The Canadian dollar was flat
against the greenback on Friday as a surprisingly strong
domestic retail sales report was tempered by data showing a
softer-than-expected annual inflation rate.
    The market saw little reaction to the other highly
anticipated event of the day, a speech from Federal Reserve
Chair Janet Yellen, which analysts said contained few surprises.
    Canada's annual inflation rate slipped to 2.1 percent in
July, while retail sales rose 1.1 percent in June, making for
the sixth straight month of gains. 
    Even with the decline, the inflation rate remained above the
Bank of Canada's 2 percent target. With the central bank
concerned about the downside risks to inflation, the report is
closely watched by investors trying to glean the future path of
monetary policy.
    The loonie hit a session low at C$1.0982 immediately
following the reports but was able to claw back those losses. 
    While the currency has seen some intraday swings, it has
largely traded in a band since the end of July. Analysts expect
it will be difficult for the loonie to make significant gains,
with investors likely to continue to favor the U.S. dollar.
    "It's looking like we are going to be pretty range-bound,"
said Ken Wills, currency strategist and broker at CanadianForex
in Toronto. 
    "It's the end of the summer doldrums as well, I don't think
anybody has an appetite to take it out of this C$1.0850 to
C$1.0980." 
    The Canadian dollar ended the North American
session at C$1.0945 to the greenback, or 91.37 U.S. cents,
unchanged from Thursday's close. For the week, the loonie
slipped 0.5 percent.
    Speaking at the annual gathering in Jackson Hole, Wyoming,
Yellen called for a "pragmatic" approach to U.S. monetary
policy, laying out why the U.S. central bank needed to move
cautiously on raising rates. 
    "I would call it a very hedged commentary," said Wills.
    "It was almost neutral but still had all the dovish elements
I think the market had priced in and I believe that's why we've
seen very little movement."
    Canadian government bond prices were mixed across the
maturity curve, with the two-year off 1 Canadian cent
to yield 1.094 percent and the benchmark 10-year up
9 Canadian cents to yield 2.075 percent.

 (Editing by James Dalgleish)
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