CANADA FX DEBT-C$ weakens as strong U.S. GDP eclipses Canadian data

Tue Dec 23, 2014 9:46am EST
 
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* Canadian dollar at C$1.1662 or 85.75 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    OTTAWA, Dec 23 (Reuters) - The Canadian dollar was weaker
against the greenback on Tuesday as figures that showed an
acceleration of economic growth in the United States in the
third quarter overshadowed data showing stronger-than-expected
growth in Canada in October. 
    The loonie was seen as likely to stick to its recent trading
range, however, as volumes wind down heading toward the end of a
holiday-shortened week. Canadian bond and equity markets will
close early on Wednesday before the Christmas and Boxing Day
holidays.
    The final Canadian economic report of the year showed gross
domestic product rose by 0.3 percent in October, helped by a
surprising surge in manufacturing. 
    But the figures did little to help the loonie, which was
weighed on by a separate report that showed third-quarter U.S.
economic growth was revised to an annualized 5 percent, the
fastest pace in 11 years. 
    "It's hard to argue with that. It carries the day," said   
Don Mikolich, executive director of foreign exchange sales at
CIBC World Markets in Toronto, of the U.S. GDP report.
    The Canadian dollar was at C$1.1662 to the
greenback, or 85.75 U.S. cents, weaker than Monday's close of
C$1.1637, or 85.93 U.S. cents.
    The U.S. data will likely have investors scrambling to try
to gauge how soon the U.S. Federal Reserve will start to raise
interest rates. Fed Chair Janet Yellen said last week the
central bank was unlikely to hike rates for "at least a couple
of meetings," which would mean April at the earliest.
 
    "As you get into January where April is only a couple
meetings away, very quickly people could be turning their
thoughts to the springtime potential for that," Mikolich said.
    In the near term, the Canadian dollar could push up against
its low for the year at C$1.1674, but it will be difficult for
the currency to push into new territory, Mikolich said.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 6 Canadian
cents to yield 1.047 percent and the benchmark 10-year
 down 39 Canadian cents to yield 1.838 percent.

 (Editing by Peter Galloway)