CANADA FX DEBT-C$ loses steam despite strong economic data

Fri Aug 29, 2014 5:14pm EDT

* Canadian dollar at C$1.0873 or 91.97 U.S. cents
    * Bond yields mixed, 10-yr at lowest since May 2013

 (Recasts with move, adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Aug 29 (Reuters) - The Canadian dollar weakened
against the greenback on Friday, pulling back from a one-month
high and bringing this week's rally to a halt as some of the
benefit it had seen from investor repositioning faded and offset
strong domestic economic data.
    Still, the loonie gained 0.6 percent for the week, partly
fueled by a sharp jump on Wednesday.
    A number of factors drove the loonie higher in recent
sessions, including fund flow speculation stemming from Burger
King's plans to buy Tim Hortons and asset
reallocation at the end of the month.
    The market had also been readying for the possibility that
Friday's economic data could come in stronger than expected and
the gross domestic product report delivered, coming in with a
3.1 percent annualized rate of growth, above expectations for
2.7 percent. 
    Despite touching a session high at C$1.0810, the loonie lost
steam through the session as the greenback fared better.
    "I think it's just part of that month-end rebalancing
pressure has been relieved from the U.S. dollar," said Ken
Wills, currency strategist and broker at CanadianForex in
Toronto.
    "My expectation is we could very well see it gain back some
strength against Canada heading into next week."
    The Canadian dollar ended the North American
session at C$1.0873 to the greenback, or 91.97 U.S. cents,
weaker than Thursday's close of C$1.0847, or 92.19 U.S. cents.
    Analysts expect the loonie will lose some of the gains it
has seen, with the currency likely to suffer from greenback
strength as the U.S. economy continues to improve.
    The U.S. dollar-Canadian dollar pairing's session low around
the 55-day moving average held as technical support, said Wills
    "I wouldn't be surprised if we're back challenging C$1.0880
and then C$1.0920 above that" next week, he said.
    The focus next week will be on the Bank of Canada's monetary
policy statement scheduled for Wednesday. The central bank is
expected to leave rates at 1 percent until the third quarter of
next year and is seen sticking to its cautious tone next week.
 
    Investors will also get August's employment report at the
end of the week. The pace of jobs growth is expected to remain
lackluster, with the economy forecast to have added 10,000 jobs.
    Canadian government bond yields were mixed, though the yield
on the benchmark 10-year slipped to a new nearly
1-1/2-year low at 1.997 percent. The two-year was
down 1 Canadian cent in price to yield 1.106 percent.

 (Editing by Jonathan Oatis)
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