CANADA FX DEBT-C$ down on low commodity prices, central bank view
* Canadian dollar at C$$1.1031, or 90.65 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, Sept 22 (Reuters) - The Canadian dollar retreated to its weakest level in nearly a week against the greenback on Monday, as commodity prices softened on concerns about Chinese demand, and following Bank of Canada comments that indicated it might be in no hurry to raise interest rates, despite higher inflation data. Over the weekend, Bank of Canada Governor Stephen Poloz said the Canadian economy still had a significant amount of room to grow, noting the higher inflation over the past half year was due to one-off factors. Senior Deputy Governor Carolyn Wilkins reinforced the central bank's position in a speech on Monday, when she also said it was possible the policy rate would need to be below neutral for some time, even after the output gap closed, to keep inflation on target. "Wilkins' speech didn't do much to curtail today's moves. It was more supportive, actually, of that trend if anything," said Mazen Issa, macro strategist at TD Securities. "Wilkins speech was fairly substantial content-wise, providing some insight on the latest thinking on the Bank of Canada." The Canadian dollar, which was underperforming most major currencies, was trading at C$1.1031 to the U.S. dollar, or 90.65 U.S. cents, weaker than Friday's close of C$1.0947, or 91.35 U.S. cents. "More broadly, we continue to see commodity prices weaken and that's not helpful for the Canadian dollar either," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. The Australian dollar touched a seven-month low against the U.S. dollar, hurt by comments from China's finance minister on Sunday in which he said the country would not dramatically alter its economic policy because of any one economic indicator. As an exporter of oil and other natural resources, the Canadian dollar is sensitive to resources prices and to the moves of other commodities-driven currencies. The market also worried that manufacturing data coming out on Tuesday from China, the world's second largest economy and one of the world's largest commodities consumers, will likely show stalled growth. Domestically, retail sales on Tuesday will be the only economic data this week. Markets are looking for a modest gain in the headline and flat core sales. "The risk is we may actually get a weaker print, so that could reinforce some of the downtrend in the Canadian dollar from today's moves," said Issa. Canadian government bond prices were higher across the maturity curve, with the two-year up 3 Canadian cents to yield 1.156 percent and the benchmark 10-year rising 21 Canadian cents to yield 2.228 percent. (Reporting by Solarina Ho; Editing by Peter Galloway and Andre Grenon)
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