CANADA FX DEBT-C$ hits C$1.12 on disappointing economic data

Tue Sep 30, 2014 4:20pm EDT
 
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* Canadian dollar at C$1.12 or 89.29 U.S. cents
    * Bond prices mostly lower across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Sept 30 (Reuters) - The Canadian dollar weakened to
a more than six-month low against the greenback on Tuesday,
piercing resistance at C$1.12 after data showed growth in
Canada's economy stalled in July.
    The loonie is down nearly 3 percent for the month, putting
it on track for its worst month since January when it was caught
in a sharp selloff. 
    For the quarter, the currency has fared even worse and is
down 4.7 percent, the biggest decline since the third quarter of
2011.
    A big driver behind the loonie's decline over the last three
months has been broad-based buying of the U.S. dollar as the
economy south of the border has picked up and the Federal
Reserve moves closer to ending its extraordinary stimulus.
    At the same time, there has been the growing view that the
Bank of Canada will stay on the sidelines longer than the Fed as
economic growth in Canada has been lackluster.
    Further evidence of a sluggish economy was Tuesday's
catalyst for a weaker loonie after data showed Canada's economy
did not expand in July. 
    "With a bare (economic) calendar, a lot of things were
riding on this number in terms of whether we confirm that we're
moving higher or if we have a bit of a pullback," said Don
Mikolich, executive director of foreign exchange sales at CIBC
World Markets in Toronto.
    "It's another question mark about the strength of the
recovery here."
    The Canadian dollar ended the North American
session at C$1.12 to the greenback, or 89.29 U.S. cents, weaker
than Monday's close of C$1.1153, or 89.66 U.S. cents.
    The loonie hit a session low of C$1.1219, its lowest since
late March.
    Breaking through that level could prompt markets to try to
test the low for the year so far at C$1.1279, which was hit in
March, said Ken Wills, currency strategist and broker at
CanadianForex in Toronto.
    Still, the coming quarter could provide an opportunity for a
bit of a pullback, Wills said.
    "I wouldn't be surprised if we come back to C$1.10 or the
high C$1.09s throughout the quarter, but I'd say in the near
term, my gut would be looking at October we're probably going to
see that C$1.1279."
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year off 1-1/2 Canadian
cent to yield 1.127 percent and the benchmark 10-year
 down 26 Canadian cents to yield 2.154 percent.

 (Editing by James Dalgleish)