CANADA FX DEBT-C$ slides with greenback as data disappoints

Fri Mar 16, 2012 4:39pm EDT
 
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* C$ ends flat at C$0.9919 vs US$, or $1.0082
    * Little changed on week, down 0.1 percent
    * Bond yields hit new 2012 highs

    By Claire Sibonney	
    TORONTO, March 16 (Reuters) - Canada's dollar ended
flat against the greenback on Friday, but fell with the U.S.
dollar against other major currencies as U.S. and Canadian
economic data disappointed the market.	
    The U.S. dollar's drop halted a rally that had taken it to
an 11-month high against the yen and a one-month peak versus the
euro. It slipped after tame U.S. inflation data
prompted investors to rethink expectations of higher U.S.
interest rates. 	
    In Canada, data showed the manufacturing sector's long
trudge to recovery from the 2008-09 recession faltered in
January as sales at the factory gate fell unexpectedly.
 	
    "The trend for today and the week overall is basically that
North American currencies have been moving together," said Greg
Moore, FX strategist at TD Securities. "That's why we've seen
the (Mexican) peso, the CAD and the U.S. dollar all
underperforming today, along with the disappointing U.S. and 
Canadian data." 	
    The Canadian dollar closed the North American
session at C$0.9919 versus the U.S. dollar, or $1.0082, little
changed from Thursday's finish of C$0.9922 versus the U.S.
currency, or $1.0079. The currency was equally flat on the week,
down just 0.1 percent.	
    Despite what he called knee-jerk reaction to the data flow
on Friday, Moore noted that the Canadian dollar was still stuck
in its recent "solid sideways range" against its U.S.
counterpart between C$0.9850-C$1.0050.	
    Also weighing on market sentiment, the Thomson
Reuters/University of Michigan's U.S. consumer sentiment gauge
slipped to 74.3 from 75.3 in February, shy of economists'
forecasts for a gain to 76.0. 	
    However, appetite for riskier growth-oriented assets
remained strong, reflected by this week's big sell-off of
Canadian government bonds and U.S. Treasuries, which was driven
by expectations for stronger growth in the U.S. economy. 	
    The recent string of encouraging U.S. data has also prompted
some traders to increase bets on the possibility of a Bank of
Canada interest rate hike sooner than previously expected, which
would be beneficial for the Canadian dollar. 	
    "Most of the news has been positive, so we now have the
market pricing in almost a 50-percent chance of a Bank of Canada
interest rate hike this year," said Camilla Sutton, chief
currency strategist at Scotia Capital.	
    Canadian government bond prices fell again on Friday as risk
sentiment improved and investors bought up more equities,
forcing yields above this week's yearly highs.	
    The two-year bond was down half a Canadian cent
to yield 1.279 percent, reaching the highest level since August.	
    The 10-year bond dropped 30 Canadian cents to
yield 2.239 percent. The yield touched 2.301, its highest level
since October.