* C$ drifts lower to C$0.9627 vs US$ or $1.0387
* Canadian bonds underperform U.S. Treasuries
By Claire Sibonney
TORONTO, July 5 The Canadian dollar slipped for
a second session against the U.S. dollar on Tuesday morning as
soft euro zone data and worries about further monetary
tightening in China spoiled investor appetite for riskier
Growth in the euro zone's dominant services sector slowed
to its weakest pace since October, while euro zone retail sales
data was also below expectations. [nL6E7I408N]
"It's a bit of a risk-off day, I think people are
responding to some of the weaker purchasing managers indexes in
Europe," said David Tulk, chief Canada macro strategist at TD
"The two currencies that are doing relatively well on the
crosses are Swiss franc, just given the flight to quality, as
well as the British pound because they had a decent PMI
Media reports about a possible rate rise in China and a
Moody's report saying the scale of problem loans at local
governments there may be much bigger than previously thought
dented risk appetite, which had returned to the markets last
week after Greece approved austerity measures. [nL3E7I507Y]
On Monday however, fears over euro zone debt returned after
Standard & Poor's warned it would treat a rollover of privately
held Greek debt now being discussed as a "selective default."
At 8:24 a.m. (1224 GMT), the currency CAD=D4 stood at
C$0.9627 to the U.S. dollar, or $1.0387, down from Monday's
North American session close at C$0.9608 versus the U.S.
dollar, or $1.0408. The day's range was a narrow
C$0.9590-C$0.9651, close to near-term resistance and support
for the domestic currency.
"It's pretty benign ... More of a consolidation after the
rally in the Canadian dollar over the last week or so and just
waiting for (U.S.) payrolls and (Canadian) employment on Friday
to kind of set the tone one way or the other," added Tulk.
"For the most part you're looking for a breakout and I
think right now you're still in this range for the time being
and we're still subjected to headline risk unfortunately."
Later in the morning, traders will be watching U.S. durable
goods and factory orders data.
Canadian bond prices were little changed across the curve,
underperforming their U.S. counterparts as Treasuries rebounded
Tulk noted that given the fact that Canadian bond prices
rallied on Monday -- when U.S. markets were closed for the
Independence Day holiday -- they didn't need to follow the move
lower in yield.
The two-year bond CA2YT=RR was flat to yield 1.581
percent, while the 10-year bond CA10YT=RR was up 3 Canadian
cents to yield 3.085 percent.
(Reporting by Claire Sibonney, Editing by Chizu Nomiyama)