CANADA FX DEBT-C$ ekes out small gain vs US$; falls 1.6 pct on week

Fri Aug 23, 2013 5:07pm EDT
 
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* C$ ends at C$1.0501 vs US$, or 95.23 U.S. cents
    * Currency falls 1.6 pct vs greenback over week
    * Canada inflation edges up in July; U.S. new home sales
fall
    * Bond prices rose across maturity curve

    By Alastair Sharp
    TORONTO, Aug 23 (Reuters) - The Canadian dollar gained
slightly against its U.S. counterpart on Friday as dismal U.S.
housing data and its possible impact on a Federal Reserve
stimulus wind-down plan overshadowed domestic inflation data.
    The loonie, as Canada's currency is colloquially known,
notched a 1.6 percent decline on the week, as investors
ratcheted up expectations that the U.S. central bank would begin
to phase out its massive bond-buying program in September.
    That prospect, which boosted the greenback, took a hit on
Friday as data showed sales of new single-family homes in the
United States fell sharply in July. 
    But the loonie gained little ground as domestic inflation
data rose less than expected, suggesting Canadian interest rates
are unlikely to rise anytime soon. 
    "The anti-Canadian dollar trade was a bit overdone by the
time the (Canadian inflation) data came out," said Adam Button,
currency analyst at ForexLive in Montreal.
    "There are very few bright spots in the global economy and
the Canadian dollar has been resilient but it has finally run
out of gas."
    The Canadian dollar is sensitive to global growth prospects
because of the underlying economy's reliance on natural resource
exports.
    Button predicted the loonie would likely test the $1.06
level next week.
    The Canadian dollar ended the day trading at
C$1.0501 to the U.S. dollar, or 95.23 U.S cents. At one point it
touched C$1.0569 to the U.S. dollar, its weakest since July 9. 
    It ended slightly stronger than Thursday's finish of
C$1.0516, but far weaker than last Friday's close of C$1.0339.
    Canada's annual inflation rate edged up to 1.3 percent in
July from 1.2 percent in June, underlining how little pressure
the Bank of Canada is under to tighten policy.
    Market operators had expected the rate to hit 1.4 percent.
The Bank of Canada aims to keep inflation at 2.0 percent.
 
    The price of Canadian government debt rose across the curve.
The two-year bond added 2 Canadian cents to yield
1.195 percent, while the benchmark 10-year bond 
gained 40 Canadian cents to yield 2.695 percent.