CANADA FX DEBT-C$ steady after domestic data spurs bounce

Fri Aug 21, 2015 9:57am EDT
 
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* Canadian dollar at C$1.3087 or 76.41 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Aug 21 (Reuters) - The Canadian dollar was steady
against its U.S. counterpart on Friday, recouping earlier losses
after data showed Canadian inflation was mostly in line with
expectations in July, while retail sales for June rose more than
forecast.
    The annual inflation rate in July rose 1.3 percent, just shy
of the 1.4 percent forecast by economists and up from 1 percent
in June, as higher prices for food and clothing offset the
moderating effect of cheaper energy. Retail sales rose 0.6
percent in June, topping expectations for a 0.2 percent rise,
but volumes were flat. 
    The currency briefly rallied to a session high after the
data, before paring gains.
    "The move on the Canadian dollar was a reaction to the fact
that we had the upside surprise on retail sales," said Andrew
Kelvin, a senior fixed-income strategist at  TD Securities.
    "But having taken a little bit deeper look into it ...
you've actually seen the Canadian dollar strength come off. So
it was a knee-jerk, at first glance it looked like a strong
number."
    At 9:34 a.m. EDT (1334 GMT), the Canadian dollar 
was at C$1.3087 to the greenback, or 76.41 U.S. cents, little
changed from the Bank of Canada's official close on Thursday of
C$1.3081, or 76.45 U.S. cents.
    It remains within a very tight range, however, trading
between C$1.306 and C$1.311 so far in the session.
    The price of crude, a key Canadian export, headed for the
eighth straight week of declines, the longest losing streak
since 1986, after a sharp drop in Chinese manufacturing
increased worries over the health of the world's biggest energy
consumer. 
    "The currency has been surprisingly resilient to oil," said
Mark Chandler, head of Canadian fixed income and currency
strategy at RBC Capital Markets.
     "Really hard for it to move from the narrow range around
C$1.31 and you can argue that it basically would have done worse
if we didn't have a net weakening over the last three sessions
in the U.S. dollar generally."
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 1.5
Canadian cents to yield 0.342 percent and the benchmark 10-year
 rising 12 Canadian cents to yield 1.278 percent.
    The Canada-U.S. two-year bond spread narrowed to -30.7 basis
points, while the 10-year spread narrowed to -78.6 basis points.

 (Additional reporting by Allison Martell; Editing by Peter
Galloway)