January 10, 2008 / 2:33 PM / 10 years ago

Canada dollar turns lower on building permits data

TORONTO (Reuters) - The Canadian dollar skidded to a three-week low versus the U.S. dollar on Thursday morning as domestic building permits data came in well below estimates.

Domestic bond prices bounced back from losses suffered in the previous session, getting a boost from the building permits data while dealers positioned themselves ahead of the more key Canadian jobs report due on Friday.

At 9:15 a.m. EST the Canadian dollar was at 98.58 U.S. cents, valuing a U.S. dollar at C$1.0144, down from 99.03 U.S. cents, or C$1.0098, at Wednesday’s close.

The latest fall in the Canadian dollar was triggered by the weak building permits data and a lower-than-expected reading on U.S. weekly jobless claims that helped support the greenback.

Together, the economic data yanked the Canadian dollar from an overnight session high of 99.50 U.S. cents, or C$1.0050.

“The market was encouraged by the claims data out of the U.S. that showed a bigger than expected drop and that has kind of tempered a bit of disappointment following last Friday’s (U.S) December payrolls number,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.

“So the markets is taking some hope from that and you are seeing a bit of strength in the U.S. dollar playing out against the Canada (dollar), and then the trend is being abetted by disappointing permits data.”

The value of Canadian building permits fell 9.9 percent in November, which was much steeper than the 2.0 percent decline that had been expected by analysts.

The report followed another weak piece of domestic data on Wednesday that showed housing starts for December missed market expectations by a wide margin.

After recording a gain of about 17.5 percent last year, the Canadian dollar has fallen about 2.3 percent so far in 2008.

The commodity-linked Canadian dollar was also unable to draw support from oil and gold prices on Thursday as each fell from record highs reached during recent sessions.

BONDS RALLY

Canadian bond prices recouped losses suffered in the previous session as the building permits data extended a recent string of weak Canadian data that supports market expectations for a Bank of Canada rate cut later this month.

But the move in bonds could be limited as investors await the employment figures due out on Friday.

“Canadian bonds are responding to the Canadian data,” said Ferley. “However, a lot of attention will be focused on key employment numbers out on Friday which just provides a more comprehensive read.”

The overnight Canadian Libor rate was at 4.2350 percent, down from 4.2783 percent on Wednesday.

Thursday’s CORRA rate was at 4.2487 percent, down from 4.2539 percent on Wednesday. The Bank of Canada publishes the previous day’s rate at around 9 a.m. (1400 GMT) daily.

The two-year bond was up 6 Canadian cents at C$101.44 to yield 3.450 percent. The 10-year bond rose 17 Canadian cents to C$101.19 to yield 3.847 percent.

The yield spread between the two-year and 10-year bond was 39.7 basis points, up from 37.3 basis points at the previous close.

The 30-year bond was up 21 Canadian cents at C$116.32 to yield 4.045 percent. In the United States, the 30-year Treasury yielded 4.334 percent.

The three-month when-issued T-bill yielded 3.75 percent, unchanged from the previous close.

Editing by Renato Andrade

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