CANADA FX DEBT-C$ steady vs US$, rallies vs pound

Tue Mar 12, 2013 4:27pm EDT
 
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* C$ at C$1.0261 versus US$, or 97.46 U.S. cents
    * Lack of domestic data limits trading impetus
    * C$ hits one-year low vs Aussie, strongest vs pound since
June 2010

    By Alastair Sharp
    TORONTO, March 12 (Reuters) - The Canadian dollar ended flat
against its U.S. counterpart on Tuesday, with this week's lack
of major domestic data expected to keep it in a tight range,
even as it made significant moves against the British and
Australian currencies.
    Volatility in the euro and yen gave currency markets their
main price action in the session, with a wild swing in the euro
zone common currency prompting many Canadian dollar traders to
step back.    
    "People are being caught off-guard, there are not a lot of
really big flows going through that I'm hearing of," said David
Bradley, director of foreign exchange trading at Scotiabank.
    Helping the loonie, as Canada's currency is colloquially
known, the discount on the price of oil sourced from Canada's
oil sands compared to the U.S. benchmark crude slipped under $20
for the first time since October, after hitting a $44 divide in
January. 
    But offsetting that, yields for longer-dated U.S. government
debt have jumped versus their Canadian counterparts so far in
March. 
    The Canadian dollar ended the day at C$1.0261 to
the greenback, or 97.46 U.S. cents, compared with C$1.0264, or
97.43 U.S. cents, at Monday's North American close.
    It has strengthened by three-quarters of a cent in the last
four sessions after a sharp weakening in recent weeks, helped by
outsized jobs growth data for February. 
    "Canada seems well positioned here between the C$1.0230 and
C$1.03 area," said Don Mikolich, executive director for foreign
exchange sales at CIBC World Markets. "We need to have some
reaffirmation on Canadian data to see Canada trade much
stronger."
    Scotia's Bradley agreed, but suggested the next string of
data would likely be weak and put further pressure on the loonie
as the Bank of Canada possibly adds more dovish language to its
outlook on interest rates.
    "If it wasn't for the strong employment data we saw on
Friday, then we would probably be comfortably trading between
C$1.03 and C$1.04," he said.
    With no major data due in Canada this week, attention turns
to numbers due out from the United States, Canada's main trading
partner.  
    The Canadian currency performed well against the sinking
British pound, at one point hitting its strongest
level since June 2010 after dismal British manufacturing data
revived fears of another recession and increased bets of more
easing by the Bank of England. 
    But it slipped against a broadly rallying Australian dollar
, hitting its weakest level since March of last year.
    The price of Canadian government debt was higher across the
curve, with the two-year bond up 3 Canadian cents to
yield 0.966 percent, while the benchmark 10-year bond
 rose 29 Canadian cents to yield 1.912 percent.
    CIBC's Mikolich suggested that the weaker Canadian currency
was likely providing some relief to the country's exporters.
    "Not to say that it's an intentional level, but I think it's
something that definitely can be beneficial for the economy, so
there's probably not a big rush to do anything that would push
us back below par too quickly."