3 Min Read
* C$ steady at C$0.9869 vs US$, or $1.0133 * Bond prices climb across curve By Claire Sibonney TORONTO, May 1 (Reuters) - The Canadian dollar held steady against its U.S. counterpart on Tuesday after stumbling in the previous session on data that showed the domestic economy unexpectedly shrank in February. Stable oil prices were also somewhat supportive of the currency as economic expansion in China helped counter a sluggish U.S. economy and bubbling euro zone debt crisis that may depress demand for fuel. The Canadian dollar outperformed other commodity-linked currencies after the Reserve Bank of Australia caught markets off guard by cutting its official interest rates by an aggressive half point. "The main focus on overnight was the RBA's surprise 50-basis point cut so the Aussie and the Kiwi seem to be the main movers against the G10," said Matt Perrier, a director of foreign exchange sales at BMO Capital Markets. Data on Monday showed Canada's gross domestic product dropped by 0.2 percent in February from January, surprising analysts who had expected a 0.2 percent increase and dampening speculation the Bank of Canada was preparing to shift to a tighter monetary policy. "Interest rate hikes are still being priced into the market although the aggressiveness with which the timing had been brought forward by the market seemed to have abated somewhat after yesterday's numbers," added Perrier. "I think the market was positioned well long of Canada and we just saw some profit taking after that number and there is potential to see Canada weaken off a little bit further in the near term." At 8:10 a.m. (1210 GMT), the Canadian dollar stood at C$0.9869 against the U.S. dollar, or $1.0133, up from Monday's session close at C$0.9879 versus the U.S. dollar, or $1.0122. Perrier saw C$0.9800-25 as the next area of U.S. dollar support. Traders noted light volume on Tuesday as a number of European and Asian stock markets, including ones in Germany, France and Italy, are closed on Tuesday for the May Day holiday. U.S. manufacturing data later in the day is expected to drive further direction. Canadian bond prices edged higher, continuing to outperform U.S. Treasuries after Monday's weaker than expected Canadian GDP. The rate-sensitive two-year bond rose 1 Canadian cent to yield 1.334 percent, while the benchmark 10-year bond was up 5 Canadian cents to yield 2.031 percent.