CANADA FX DEBT-C$ eases as U.S. data bolsters Fed expectations

Thu Aug 29, 2013 4:47pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ at C$1.0530 vs US$, or 94.97 U.S. cents
    * U.S. Q2 GDP grows at 2.5 pct annual rate; job claims fall
    * Canada Q2 current account deficit widens to C$14.6 billion
    * Bond prices rise across maturity curve

    By Solarina Ho
    TORONTO, Aug 29 (Reuters) - The Canadian dollar softened
against its U.S. counterpart on Thursday after data showed U.S.
economic growth accelerated more quickly than expected during
the second quarter.
   The greenback hit a two-week high as the latest data
supported expectations the U.S. Federal Reserve could soon be
ready to scale back its economic stimulus program, known as
quantitative easing.
    U.S. gross domestic product grew at a 2.5 percent annual
rate in the second quarter - more than double the pace of the
previous three months - while the number of Americans filing new
claims for unemployment benefits fell last week. 
    "These numbers suggest the U.S. economy is doing not too
badly at the moment. It doesn't need the emergency support that
QE (quantitative easing) represents," said Shaun Osborne, chief
currency strategist at TD Securities.
    "There's a fairly strong mandate here for the Fed to
actually start to reduce asset purchases in September," he said,
adding that Canadian data released on Thursday did not help the
Canadian currency.
    Canada's current account gap widened to C$14.6 billion
during the second quarter, in line with expectations, as exports
struggled to gain traction and oil shipments to the United
States fell. Meanwhile, producer prices rose for the second
straight month in July.  
    The Canadian dollar finished the session at
C$1.0530 to the U.S. dollar, or 94.97 U.S. cents, weaker than
Wednesday's North American finish of C$1.0485, or 95.37 U.S.
cents.
    Osborne said trading was thin on Thursday due to late-summer
holidays and noted that some stop-loss orders - placed to sell
when a currency hits a certain price - were likely tripped when
the currency pushed through the C$1.0510-to-C$1.0515 level.
There is a good chance it could weaken into C$1.06 territory in
the next week or two, he added.
    The commodities-linked Canadian dollar also lost some of the
support it has been getting from oil prices, which retreated
after a two-day surge. The delay of a Western military response
to the reports of a chemical weapons attack on civilians in
Syria helped calm worries over Middle East oil supplies. 
    Canada's second-quarter economic growth figures and a slew
of U.S. data on Friday will be the next drivers for the currency
.
    "Everyone is expecting a weaker number, the question is how
week," Benjamin Reitzes, senior economist and foreign exchange
strategist at BMO Capital Markets, said of the Canadian growth
report.
    Canadian government bond prices rose across the maturity
curve. The two-year bond climbed 1 Canadian cent,
yielding 1.194 percent, while the benchmark 10-year bond
 rose 15.5 Canadian cents, yielding 2.605 percent.