CANADA FX DEBT-C$ bolstered by positive North American data

Tue Apr 16, 2013 9:38am EDT
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* C$ at C$1.0211 vs US$, or 97.93 U.S. cents
    * Canadian factory sales rise 2.6 percent in Feb
    * U.S. new home starts up 7 percent in March
    * Bond yields rise across curve

    By Solarina Ho
    TORONTO, April 16 (Reuters) - The Canadian dollar was firmer
against the U.S. dollar on Tuesday, recovering after its biggest
one-day retreat in more than 16 months in the previous session,
buoyed by stronger-than-expected U.S. and Canadian economic
    Canadian factory sales rose 2.6 percent in February from
January, the largest gain since July 2011, helped by higher
sales of transportation equipment, energy products and food.
    Meanwhile, U.S. housing data offered more evidence of a
healthier market, as groundbreaking to build U.S. homes rose 7
percent last month to a 1.04 million-unit annual rate, its
highest level since 2008. 
    "The Canadian numbers are quiet positive ... it looks like
Canada's economy will pick up in the first quarter after sub-1
percent growth in the second half of last year, so that's
encouraging," said Sal Guatieri, senior economist at BMO Capital
    He also said the U.S. housing data showed a recovery that
was in full swing, though a drop in permits signaled a more
subdued pace of home building over the next couple of months.
    "Suffice to say the U.S. housing market trend is clearly
upwards and that's great for Canada's forest and lumber
industry. So, overall, the two reports are positive for the
Canadian dollar," said Guatieri.
    At 9:01 a.m. (1401 GMT), the Canadian dollar was
trading at C$1.0211 against the U.S. dollar, or 97.93 U.S.
cents, stronger than Monday's North American finish at C$1.0254,
or 97.52 U.S. cents. 
    It touched its strongest level of the session versus the
greenback shortly after the data was released, hitting C$1.0205,
or $97.91 U.S. cents. The currency had weakened more than a cent
on Monday, its biggest one-day loss against the U.S. dollar
since December 2011, pressured by plunging commodity prices.
    U.S. data on Tuesday also showed tame inflation, which
Guatieri said supports the Fed's current quantitative easing
    Separately, Canadian government data showed foreign
investors cut their holdings of Canadian securities by C$6.3
billion ($6.2 billion) in February, attributed primarily to
merger and acquisition activity. 
    The loonie, as it is colloquially known, was stronger versus
the Japanese yen and British sterling, but
was weaker against its commodities-linked sister currencies, the
Australian and the New Zealand dollars. It
was also trading at its weakest level against the euro
 in more than five weeks.
    The currency was expected to trade between the 50-day moving
average of C$1.0179 and C$1.0258 on Tuesday, according to a
Scotiabank note.
    The price of Canadian government debt was lower across the
curve, with the two-year bond shedding 1.5 Canadian
cents to yield 0.943 percent and the benchmark 10-year bond
 falling 33 Canadian cents to yield 1.747 percent.