CANADA FX DEBT-C$ eases moderately after data and as bank policies weigh

Fri Jan 23, 2015 4:58pm EST
 
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* Canadian dollar at C$1.2424 or 80.49 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Jan 23 (Reuters) - The Canadian dollar on Friday
slipped to its weakest close in 5-1/2 years against the
greenback, which hit 11-year highs against a basket of other
major currencies as central bank policies around the world
diverged sharply from those of the Federal Reserve.
    U.S. crude prices , an influential driver for
the oil-sensitive Canadian dollar, also fell on data that showed
U.S. crude stockpiles in Cushing, Oklahoma, rose 2.7 million
barrels in the week ending Tuesday and reports of a partial
shutdown at a BP oil refinery in Whiting, Indiana. Canada is a
significant crude exporter. 
    The U.S. dollar's strength follows the European Central
Bank's announcement on Thursday that it would pump a trillion
euros into the region's economy to revive weak growth and ward
off deflation. The ECB's move came after the Bank of Canada
stunned financial markets on Wednesday with a wholly unexpected
25 basis-point interest rate cut to 0.75 percent.
    In contrast, the Fed remains on track to hike U.S. interest
rates sometimes this year on the back of a robust U.S. economy.
    "I expect the Canadian dollar will continue to lose some
ground, especially given the fact that U.S. metrics have been
fairly positive," said Lennon Sweeting, a currency Strategist
with USForex in Toronto.
    The Canadian dollar ended the session at C$1.2424
to the greenback, or 80.49 U.S. cents, its weakest finish since
April 2009, and weaker than Thursday's close of C$1.2404, or
80.62 U.S. cents.
    Sweeting said the Canadian dollar's current level was good
for exports and the overall economy, and said the next key
resistance level would be around C$1.27 versus the U.S. dollar.
    The currency, battered by this week's shock rate cut, was
stronger overnight but then briefly weakened to a 5-1/2-year low
after data showed Canada's annual inflation rate in December
dropped to 1.5 percent from 2.0 percent, a nine-month low.
    Retail sales for November unexpectedly rose 0.4 percent to a
record C$43.03 billion, helped by sales of new electronics
products. Analysts had, on average, expected a decline of 0.2
percent.
    "This is close enough to what people were looking for and
more generally, I think everyone's still in shock after the Bank
of Canada move," said David Tulk, chief Canada macro strategist
at TD Securities.
     Canadian government bond prices were mixed across the
maturity curve, but the two-year was up 1.5 Canadian
cents yielding 0.542 percent and the benchmark 10-year
 added 88.6 Canadian cents to yield 1.444 percent.

 (Editing by Peter Galloway and James Dalgleish)