CANADA FX DEBT-C$ stabilizes after six-month low

Mon Sep 29, 2014 9:51am EDT
 
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* Canadian dollar at C$1.1152 or 89.67 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Sept 29 (Reuters) - The Canadian dollar was little
changed against the greenback on Monday, stabilizing after it
hit a six-month low overnight, though the loonie was expected to
be kept on the ropes by weak oil prices and optimism over the
U.S. economy.
    The Canadian currency lost 1.7 percent last week, breaking
through the C$1.11 level as it was hurt by broad U.S. dollar
strength and the growing view that the Bank of Canada will stay
on the sidelines longer than the Federal Reserve.
    The loonie had extended those losses in early trading but
managed to recover with investors finding few fresh incentives
to push the currency lower, said Scott Smith, senior market
analyst at Cambridge Mercantile Group in Calgary.
    "We're really corralled after last week's fairly poor
performance in the loonie," Smith said.
    There was no Canadian economic data on tap for Monday, but
the calendar will pick up with July gross domestic product on
Tuesday, and trade balance data later in the week. Investors
will also be watching the U.S. jobs report due on Friday.
    The Canadian dollar was at C$1.1152 to the
greenback, or 89.67 U.S. cents, a touch stronger than Friday's
close of C$1.1155, or 89.65 U.S. cents.
    The loonie hit a session low of C$1.1178 in overnight
trading, its lowest level since late March.
    "Where we're at now, there's not going to be a lot of
resistance if we continue to get data out of the U.S. that is of
an interest rate environment that is likely to increase ahead of
the Bank of Canada," said Smith.
    "It's really going to be data dependent going forward but
there's not going to be a lot of resistance road blocks, so I
think it's fairly safe to assume we could potentially be seeing
C$1.12 depending on what happens this week with the employment
data."
    Encana Corp's bid to buy the United States' Athlon
Energy for $5.93 billion in cash could imply a large
negative flow for the Canadian dollar leading into mid-December
when the deal is expected to close, Camilla Sutton, chief
currency strategist at Scotiabank, wrote in a note.
 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 3 Canadian cents
to yield 1.119 percent and the benchmark 10-year up
28 Canadian cents to yield 2.134 percent.

 (Editing by Chizu Nomiyama)