CANADA FX DEBT-C$ extends gains, helped by China trade data

Wed Feb 12, 2014 10:05am EST
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* Canadian dollar at C$1.0993 or 90.97 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Feb 12 (Reuters) - The Canadian dollar firmed
against the greenback on Wednesday, extending recent gains after
data from China showed surprisingly strong growth in imports,
hitting a six-month high in January, in the world's
second-largest economy. 
    The currency strengthened through the C$1.10 barrier in the
overnight session, but then gave back some of the gains as
analysts expressed some skepticism over the reliability of the
Chinese figures.
    Still, the robust trade performance tempered fears of a
deepening economic malaise in China. As a resource producer,
Canada's currency is often sensitive to economic data out of
China, a major consumer of commodities. 
    The Canadian dollar has strengthened in four of five
sessions, recouping losses after hitting a 4-1/2 year low at the
end of January.
    Still, most analysts expect more weakness in store for the
loonie as it continues to be driven by a Bank of Canada stance
that is unlikely to lead to higher interest rates any time soon.
    "What we will find is that the Canadian dollar reprieve will
provide some U.S. dollar-buying opportunities at a much more
favorable level," said Dean Popplewell, chief currency
strategist at OANDA in Toronto. 
    "The Canadian dollar is really stuck in a 4 or 5 cent
contained range." 
    The Canadian dollar was at C$1.0993 to the
greenback, or 90.97 U.S. cents, stronger than Tuesday's close of
C$1.1017, or 90.77 U.S. cents.
    The release of the Canadian government's 2014-15 budget on
Tuesday, which put the country on course to balance its books in
2015 or even sooner, had little impact on the loonie. 
    The budget showed a smaller-than-expected deficit for the
2014-15 fiscal year and estimated a bigger surplus than
anticipated the following year, but analysts said the news had
largely been priced in by the currency market. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year off 0.8 Canadian
cents to yield 1.017 percent, and the benchmark 10-year
 down 7 Canadian cents to yield 2.469 percent.