CANADA FX DEBT-C$ retreats on weak July retail sales

Tue Sep 23, 2014 4:59pm EDT
 
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* Canadian dollar at C$1.1069, or 90.34 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Sept 23 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday, reversing overnight gains
after data showed retail sales unexpectedly declined in July.
    The currency had strengthened overnight after the
HSBC/Markit Flash China Purchasing Managers' Index (PMI) showed
the manufacturing sector in China, one of the world's biggest
resource consumers, had picked up momentum this month.
 
    After six months of gains, Canadian retail sales fell 0.1
percent in July from June's record level, with strong auto sales
failing to offset weakness in areas such as clothing and
merchandise. The median forecast in a Reuters survey of analysts
was for a 0.5 percent increase overall. 
    "All the air got taken out of Canadian dollar's balloon when
the retail sales number printed earlier this morning for the
month of July. It really missed the Street's expectations," said
Brad Schruder, director, foreign exchange sales, at BMO Capital
Markets.
    Schruder noted, however, that the currency did not weaken
through the C$1.11, or 90.10 U.S. cent, level, and said that its
failure to do so could provide some support.
    "There had been pressure on the CAD to weaken, at least for
a couple of weeks," he said. "This is supportive, but we've also
seen enough data that has been supportive of the view that
Canada should appreciate."
    Retail sales was the last major data point before gross
domestic product figures for July are released next Tuesday.
    The Canadian dollar finished Tuesday's session at
C$1.1069 to the U.S. dollar, or 90.34 U.S. cents, weaker than
Monday's close of C$1.1031, or 90.65 U.S. cents, and well off
the C$1.0986, or 91.02 U.S. cents, it touched earlier in the
session.
    Except for its commodity counterparts, the Canadian dollar
weakened against other major currencies.
    "In general, the U.S. dollar wants to continue to
strengthen," said David Bradley, director of foreign exchange
trading at Scotiabank. "That trend is firmly in place, but
obviously when data or events come in, it might cause a slight
reversal. You're going to see some profit-taking or some
stop-losses go through." 
    Bradley added that geopolitical factors overnight also
affected the market, including the United States and its Arab
allies bombing Syria for the first time on Tuesday.
 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 6.7 Canadian
cents to yield 1.122 percent and the benchmark 10-year
 adding 49 Canadian cents to yield 2.171 percent.

 (Editing by Jeffrey Benkoe; and Peter Galloway)