CANADA FX DEBT-C$ steady after monthly Canada economic data

Fri Sep 28, 2012 9:32am EDT
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* C$ flat at C$0.9812 vs US$, or $1.0192
    * Bond prices rise across the curve

    By Claire Sibonney
    TORONTO, Sept 28 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Friday as attention
turned from Spain's new budget to the next tests for the euro
zone and North American economic data heading into the month and
quarter's end.
    Canadian government data showed that the country's economy
grew by an inflation-adjusted 0.2 percent in July on strength in
manufacturing, utilities and wholesale and retail trade.
    The results exceeded analysts' expectations, but June growth
figures were revised down, leaving actual gross domestic product
in July almost exactly as forecast.
    "The economy is continuing to expand, but the pace at around
2 percent is very modest and not going to provide much downward
pressure on the unemployment rate," said Paul Ferley, assistant
chief economist At Royal Bank of Canada.
     "With the revision, the overall pace is still fairly
moderate (and) argues for the Bank of Canada to continue to keep
monetary conditions highly stimulative."
    The Canadian dollar initially strengthened immediately after
the data, but quickly retreated back near Thursday's close.
    At 9:08 a.m. (1308 GMT), the Canadian dollar was
trading at C$0.9810 versus the U.S. dollar, or $1.0194, little
changed from Thursday's North American session close at C$0.9809
to the U.S. dollar, or $1.0195.
    Matt Perrier, a director of foreign exchange sales at BMO
Capital Markets, noted recent Canadian dollar support around
C$0.9855-60 and resistance at around C$0.9730-80. 
    "The market is just taking a bit of a sideways stance going
into this morning's data and flows," said Perrier.
    "There was chatter yesterday that the general month-end
flows would be demand for U.S. dollars...the chatter and the
reality are not always the same when it comes down to the actual
fixing so we'll get a better sense as we get closer to the
windows," he added, noting the end of European trading sessions
at 11:00 a.m. and 12:00 p.m. (ET).
    South of the border, U.S. consumer spending rose in August
by the most in six months as households stretched to pay for
higher gasoline prices, according to a government report on
    The data pointed to lackluster economic growth in the third
quarter, which briefly put further pressure on the U.S. dollar.
    Markets in riskier assets were otherwise generally buoyed by
expectations that the tough Spanish budget is a prelude to an EU
aid program that will allow the European Central Bank to try to
reduce Spain's borrowing costs by buying its bonds.
    The results of an independent audit of Spain's banks will be
published later in the day, while Moody's Investors Service is
expected to finish its rating review on the sovereign, which may
lose its investment grade status. 
    Meanwhile, French President Francois Hollande's Socialist
government unveiled sharp tax hikes on business and the rich in
a 2013 budget aimed at showing France has the fiscal rigor to
remain at the core of the euro zone. 
    Canadian bond prices advanced across the curve, following
U.S. Treasuries higher as an initially positive reception for
Spain's 2013 budget faded and traders refocused on the hurdles
ahead for Madrid. 
    The two-year bond rose 6 Canadian cents to yield
1.071 percent, while the benchmark 10-year bond was
up 30 Canadian cents, yielding 1.723 percent.