CANADA FX DEBT-C$ hits more than 5-month low as momentum builds

Fri Sep 12, 2014 4:36pm EDT
 
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* Canadian dollar at C$1.1094 or 90.14 U.S. cents
    * Bond prices lower across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Sept 12 (Reuters) - The Canadian dollar sold off
against the greenback for a second straight session on Friday,
touching a more than five-month low as a break through technical
resistance barriers lent downward momentum to the currency. 
    The loonie was down nearly 2 percent for the week, its worst
week since early January, as markets have been focused on trying
to gauge when the Federal Reserve might start to raise interest
rates.
    The loonie's weakness has accelerated since Thursday, when
it broke through technical resistance at C$1.10 after previous
failed attempts earlier in the week. Still, the currency stopped
short of the C$1.11 mark, which is seen as the next hurdle to
overcome.
    "On the technical picture, this is opening up a new range,"
said Ken Wills, currency strategist and broker at CanadianForex
in Toronto.
    "I would say looking at the medium- to long-term, we could
be looking at a C$1.09 to C$1.11 or C$1.1150 with the way things
are looking today," he said.
    A U.S. economic recovery that is picking up steam, as well
as a Fed that might raise rates sooner than expected, are likely
to continue to benefit the U.S. dollar, to the detriment of the
loonie.
    Optimism over the U.S. economy was reinforced by data that
showed retail sales rose, as expected, in August, while the
previous month was revised higher. 
    "When you look at the relative performance of the economies
of the U.S. and Canada, decent retail sales numbers reinforce
the mindset that the U.S. is probably still three to six months
ahead of the Canadian economy in terms of where they are in the
recovery," said Scott Smith, senior market analyst at Cambridge
Mercantile Group in Calgary.
    "As that progresses, we'll see continued upward pressure on
the U.S. dollar-Canadian dollar."
    The Canadian dollar ended the North American
session at C$1.1094 to the greenback, or 90.14 U.S. cents,
weaker than Thursday's close of C$1.1047, or 90.52 U.S. cents.
The loonie hit a session low of C$1.1098, its lowest level since
late March.
    Focus on central bank policy was intensifying ahead of the
Fed's policy-setting meeting next week, with investors watching
for any change in language that would signal when the Fed will
raise rates. 
    Still, with the run up the U.S. dollar has seen in
anticipation of a change, there is the risk markets may have
gotten ahead of themselves, said Wills.
    Canadian government bond prices were lower across the
maturity curve, with the two-year off 2 Canadian
cents to yield 1.159 percent and the benchmark 10-year
 down 35 Canadian cents to yield 2.238 percent.

 (Reporting by Leah Schnurr; Editing by Dan Grebler)