CANADA FX DEBT-C$ weaker after weak retail sales data; bonds rise

Fri Nov 20, 2015 5:05pm EST
 
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(Adds strategist comment, updates prices)
    * Canadian dollar settles at C$1.3345, or 74.93 U.S. cents
    * Bond prices mixed across the maturity curve

    By Alastair Sharp
    TORONTO, Nov 20 (Reuters) - The Canadian dollar weakened
against the U.S. dollar and Canadian government bonds
outperformed Treasuries on Friday as weaker-than-anticipated
retail sales data and volatile crude oil price action weighed.
    The currency ended the week testing the weakest levels of
its recent range between C$1.3250 and C$1.3370, after a string
of domestic data darkened the economic outlook just as the
Federal Reserve prepares to raise U.S. interest rates.
    "Over the course of the week it's just been a run of weak
data but Canada's (currency) has proven to be fairly sticky and
has been unable to push through C$1.3380 resistance," said Mazen
Issa, a senior foreign exchange strategist at Toronto-Dominion
Bank based in New York.
    The Canadian dollar settled at C$1.3345 to the
greenback, or 74.93 U.S. cents, weaker than Thursday's official
close of C$1.3297, or 75.20 U.S. cents.
    Speculators have increased bearish bets on the Canadian
dollar, according to data released on Friday by the U.S.
Commodity Futures Trading Commission. 
    Issa said that U.S. crude oil's fall below $40 a barrel
before recovering had added to pressure on the currency of
Canada, a major energy exporter.
    Retail sales unexpectedly fell 0.5 percent in September,
dragged down by lower fuel prices and slower auto sales, data
from Statistics Canada showed on Friday. 
    Earlier in the week, wholesale trade and factory sales data
both unexpectedly fell.  
    "We do think there is one more leg higher in dollar/Canada,"
Issa said. "It's more likely to be a policy-induced catalyst
than it is to be driven by data." 
    Against the euro, the Canadian dollar firmed 0.3
percent to C$1.4212 after European Central Bank President Mario
Draghi fed expectations for additional policy easing in
December. 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price up half a
Canadian cent to yield 0.617 percent and the benchmark 10-year
 slipping 2 Canadian cents to yield 1.625 percent.
    The Canada-U.S. two-year bond spread was 2.7 basis points
wider at -30 basis points, its widest since mid-September as
investors raised their bet that Canadian interest rates will lag
their U.S. counterparts.

 (Additional reporting by Fergal Smith; Editing by W Simon and
James Dalgleish)