CANADA FX DEBT-C$ firms after rebound in monthly GDP

Mon Mar 31, 2014 9:45am EDT
 
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* Canadian dollar at C$1.1021 or 90.74 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, March 31 (Reuters) - The Canadian dollar
strengthened against the greenback on Monday, boosted by data
that showed the country's economy rebounded at a
faster-than-expected pace in January.
    Canadian gross domestic product showed growth of 0.5 percent
in January, bouncing back from a decline of 0.5 percent in
December as the economy was hampered by unusually harsh winter
weather. 
    The loonie had been on a strong footing heading into the
report and it touched a session high shortly after the data was
released.
    While there were some good underlying factors in the data,
the move was likely a knee-jerk reaction from investors who have
been bearish over Canadian economic data, said Scott Smith,
senior market analyst at Cambridge Mercantile Group in Calgary.
    "It essentially erases the decline we saw in December, so
looking forward, it's not a huge surprise or really changes
anything too much in the fundamental backdrop for the Canadian
economy," said Smith.
    The Canadian dollar was at C$1.1021 to the
greenback, or 90.74 U.S. cents, stronger than Friday's close of
C$1.1060, or 90.42 U.S. cents. The loonie earlier touched a
session high of C$1.1002.
    The currency traded strongly higher last week as it
rebounded from a recent 4-1/2-year low. Still, many analysts
believe that a number of factors, including a sluggish economy
and dovish Bank of Canada, are likely to exert pressure on the
loonie.
    The U.S. dollar depreciated by 1.4 percent against the
Canadian dollar last week, driving it to a 3-week high Friday.
    "I think where we are now, we're pretty strong and the
loonie is going to have a tough time going much higher from
here," said Smith.
    The C$1.10 level should offer good support for the U.S.
dollar-Canadian dollar pairing, while the 50-day moving average
around C$1.1085 should act as a cap for the session, said Smith.
    Canadian government bond prices were lower across the
maturity curve, with the two-year off 4-1/2 Canadian
cents to yield 1.098 percent and the benchmark 10-year
 down 49 Canadian cents to yield 2.502 percent.

 (Editing by Bernadette Baum)