CANADA FX DEBT-C$ softens on lower oil prices, weak data

Mon Mar 30, 2015 10:12am EDT
 
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* Canadian dollar at C$1.2649 or 79.06 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, March 30 (Reuters) - The Canadian dollar was weaker
against its U.S. counterpart on Monday in light trading,
pressured by lower oil prices and as investors looked ahead to
domestic data later this week.
    U.S. data showed consumer spending rose negligibly in
February, the latest sign that the U.S. economy has been
experiencing a soft first quarter, pinched by the strong
greenback and bad weather, among other factors. Meanwhile,
inflation edged higher, but was still below target.
 
    "We still expect it to be a bit on the soft side through the
first half of this year," said Mazen Issa, macro strategist at
TD Securities.
    "Once we get that break higher ... that will give the Fed
more confidence to begin lifting the policy rate."
    In Canada, data showed producer prices rose 1.8 percent in
February from January, the first increase in six months, helped
by higher prices for energy and petroleum products.
 
    The price of crude, a major Canadian export, dropped as
several world powers discussed a possible deal with Iran over
its nuclear program. A deal could bring an end to sanctions and
see an increase in Iranian oil exports that would add to an
already well-supplied oil market. 
    At 9:30 a.m. (1330 GMT), the Canadian dollar was
trading at C$1.2649 to the greenback, or 79.06 U.S. cents,
weaker than Friday's close of C$1.26, or 79.37 U.S. cents.
    Some market participants have also taken time off ahead of a
shortened work week due to the Good Friday statutory holiday.
Issa said to expect slightly more volatility due to thin
liquidity. Canadian equity markets will be closed on Friday.
    Investors are expecting poor economic growth numbers in
Canada for January due on Tuesday as well as weak trade figures
for February due on Thursday. Markets will also be taking note
of U.S. employment data on Friday. 
   "A lot of (the GDP) weakness is somewhat priced into the
currency," said Issa, but said the numbers could be even weaker
than expected, which could push the Canadian dollar to weaken
further.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1.5 Canadian
cents to yield 0.514 percent and the benchmark 10-year
 edging 2 Canadian cents higher to yield 1.374
percent.

 (Reporting by Solarina Ho; Editing by Meredith Mazzilli)