CANADA FX DEBT-C$ flat vs US$; market awaits central bank

Mon Jul 16, 2012 4:33pm EDT
 
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* C$ ends flat vs US$ at C$1.0147
    * Hits record high against euro
    * U.S. retail sales data, Canada securities data offset
    * 10-year bond yields touch record low

    By Jennifer Kwan
    TORONTO, July 16 (Reuters) - Canada's dollar was little
changed against its U.S. counterpart on Monday, but hit a record
high versus the euro amid mixed North American economic data and
as investors awaited comments from the Bank of Canada.
    Against the greenback, the Canada's currency fell
as low as C$1.0174, or 98.29 U.S. cents, after data showed U.S.
retail sales fell for a third straight month in June.
 
    But against the euro, the Canadian dollar hit
another consecutive record high, adding to its string of recent
gains. It advanced to C$1.2358, or 80.92 euro cents, its
strongest level against the common currency since it was created
in January 1999.
    Data showed foreigners snapped up Canadian securities in
record numbers in May, reflecting Canada's growing role as a
safe haven during global economic turmoil.
    Canada, which boasts stronger fiscal and economic
fundamentals than most developed Western economies, said
non-residents bought C$26.11 billion of stocks, bonds and money
market paper in May, well above the previous C$22.88 billion
record from May 2010. 
    "There are a number of concerns. The global growth backdrop,
the U.S. growth backdrop and that I think is weighing on
financial markets and keeping the Canadian dollar contained,"
said David Watt, chief economist at HSBC Bank Canada.
    The Canadian dollar ended at C$1.0147 against the U.S.
dollar, or 98.55 U.S. cents, little changed from Friday's North
American session close at C$1.0146 versus the greenback, or
98.56 U.S. cents.
    "Dollar/Canada has just been caught between general dollar
moves and cross-related support for the currency," said Matt
Perrier, director of foreign exchange sales at BMO Capital
Markets.
    Perrier put immediate U.S. dollar resistance around
C$1.0175-C$1.02. For the euro, he noted a healthy retracement
back to C$1.026-C$1.027.
    Going forward, all eyes will be on the accompanying
statement by the Bank of Canada on Tuesday. Analysts unanimously
expect the Bank of Canada to hold its main policy rate at 1
percent on July 17, but the real focus will be on whether it
will repeat, dilute or omit the message that it may soon need to
raise the rate. 
    
    10-YEAR BOND YIELD AT RECORD LOW
    AAA-rated Canada emerged from the global financial crisis in
better shape than most other developed nations, a draw to
investors worried about economic problems in Europe and the
patchy U.S. recovery.
    The Canadian data showed foreigners bought C$16.67 billion
of Canadian bonds in May, the most since May 2009. Of that,
C$9.47 billion were federal government bonds mainly purchased on
the secondary market.
    Canadian bond prices picked up across the curve on Monday,
adding to gains alongside Treasuries after the U.S. retail sales
drop. 
    The 10-year bond yield touched a record low at
1.596 percent. The two-year government bond yielded
around 0.960 percent.