By Frank Pingue
TORONTO, March 6 (Reuters) - The Canadian dollar turned lower versus the U.S. dollar on Thursday morning as data showed domestic building permits fell in January, but higher oil prices helped cushion the currency's fall.
Domestic bond prices rose across the curve as a combination of weak domestic data and a small explosion in New York's Times Square ramped up investor appetite for the security offered by government debt.
At 9:15 a.m. (1415 GMT), the Canadian dollar was at US$1.0141, valuing a U.S. dollar at 98.61 Canadian cents, down from US$1.0143, valuing a U.S. dollar at 98.59 Canadian cents, at Wednesday's session close.
The currency was mostly flat until the building permits data, which slipped for the third straight month, knocked it as low as US$1.0116, valuing a U.S. dollar at 98.85 Canadian cents, before recovering slightly.
"The slippage in permits in recent months suggests that some of the steam is finally coming out of that market and that will take some of the steam out of domestic spending more generally," said Doug Porter, deputy chief economist at BMO Capital Markets.
Porter also said U.S. data that showed new applications for jobless benefits fell by more than expected last week gave a boost to the U.S. dollar and magnified the Canadian dollar's early morning slip.
But its decline was cushioned somewhat by another rise in oil prices, this time to a record near $106 a barrel, and gold prices that sat within sight on $1000 an ounce.
The Canadian dollar, which rallied nearly 1 percent during Wednesday's session on the back of higher oil prices, is often influenced by prices for oil and gold since they represent two of Canada's major exports.
Investors will now look ahead to the February's Ivey Purchasing Managers Index, due at 10:00 a.m.
Bond prices were higher as investors sought more secure assets given the weak domestic data and the nagging credit market concerns that have been roiling through the market and unsettling investors.
Also offering some support was news of an explosion at a U.S. military recruiting center in New York's Times Square in the early hours of Thursday. there were no injuries.
"It looked to have just caused a little bit of anxiety to ripple through the market," said Porter. "But generally I don't think there is going to be a huge move ahead of tomorrow's double header on the employment front."
Key February employment reports from Canada and the United States are due on Friday.
The overnight Canadian Libor rate LIBOR01 was 3.6650 percent, up from 3.6466 percent on Wednesday.
Wednesday's CORRA rate CORRA= was 3.4942 percent, down from 3.5104 on Tuesday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond was up 13 Canadian cents at C$102.81 putting its yield at 2.572 percent. The 10-year bond rose 33 Canadian cents to C$103.12 to yield 3.598 percent.
The yield spread between the two- and 10-year bond was 103.2 basis points, up from 99.7 points at the previous close.
The 30-year bond increased 50 Canadian cents to C$115.15 to yield 4.105 percent. In the United States, the 30-year Treasury yielded 4.591 percent.
The three-month when-issued T-bill yielded 2.71 percent, down from 2.81 percent at the previous close. (Editing by Renato Andrade)