CANADA FX DEBT-C$ firms on weak U.S. data, crude stays under pressure

Wed Jan 14, 2015 10:04am EST
 
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* Canadian dollar at C$1.1943 or 83.73 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Jan 14 (Reuters) - The Canadian dollar strengthened
on Wednesday against its U.S. counterpart, which fell on
weaker-than-expected U.S. retail sales data, while crude
remained under pressure after the World Bank cut its economic
growth forecasts for this year and next.
    The World Bank forecast the global economy would grow 3
percent this year, below the 3.4 percent it forecast in June,
due to disappointing economic prospects in the euro zone, Japan
and elsewhere. 
    Retail sales in the United States fell 0.9 percent in
December as demand fell nearly across the board. It was the
largest decline in 11 months and sent the U.S. dollar lower.
 
    "One of the most popular trades for 2015 is expectations the
U.S. dollar will continue to strengthen this year on the back of
policy normalization at the Fed," said senior economist and
strategist Charles St-Arnaud of Nomura Securities in London.
    "Obviously a weak number can throw a bit of doubt on the
story."
    At 9:43 a.m. (1443 GMT), the Canadian dollar was
trading at C$1.1943 to the greenback, or 83.73 U.S. cents,
modestly firmer than Tuesday's close of C$1.1954, or 83.65 U.S.
cents.
    The currency remains near its weakest levels since April
2009, however, and St-Arnaud said it could hit C$1.25 by
mid-2015.
    "Everything signals that you'll have a relatively big
divergence between monetary policy in Canada and the United
States and that should further drive the Canadian dollar lower,"
St-Arnaud said, adding that next week's Bank of Canada meeting
will be key. He cautioned the market may not be ready for a
dramatic downward revision to the central bank's forecasts.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 5.5 Canadian
cents to yield 0.889 percent and the benchmark 10-year
 jumping 59 Canadian cents to yield 1.536 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)