CANADA FX DEBT-C$ hits one-week low on trade data, oil drop

Thu Mar 10, 2011 10:12am EST
 
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 * C$ drops as low as $1.0251, lowest point since March 2
 * Bond prices rise on safe-haven demand
 * Canada trade surplus C$116 mln, much less than forecast
 * Oil futures fall, U.S. dollar gains on euro zone worries
 By Ka Yan Ng
 TORONTO, March 10 (Reuters) - Canada's dollar fell to a
one-week low against the greenback on Thursday morning as oil
prices dropped and data showed the country's trade surplus
narrowed more than expected in January.
 The Canadian dollar CAD=D4 dropped as low as C$0.9755 to
the U.S. dollar, or $1.0251, as Canada's trade surplus fell to
C$116 million in January from a downwardly revised C$1.7
billion surplus in December. Analysts surveyed by Reuters had,
on average, forecast a trade surplus of C$2.6 billion.
[ID:nSCLAEE7A2]
 "The trade numbers were a great deal worse than expected.
Our economic data is still sort of mixed. I would think that
not many people are expecting a midyear (interest) rate hike
anymore," said John Curran, senior vice president at
CanadianForex.
 "We bottomed out yesterday near trend-line support, and
with numbers like that, sure, it's time to rethink your
Canadian dollar positioning for the medium term."
 At 9:45 a.m. (1445 GMT), the Canadian dollar was at
C$0.9753 to the U.S. dollar, or $1.0253, down from Wednesday's
close of C$0.9687 to the U.S. dollar, or $1.0323.
 The trade figures firmed up market expectations that the
Bank of Canada will stand pat on interest rates on its April 12
policy-setting date. Based on overnight index swaps, markets
are pricing in a 91.26 percent probability of no change in
rates, up from 90.60 percent just ahead of the trade data,
according to a Reuters calculation.
 The market is not fully pricing in a hike until the central
bank's September policy-setting date.
 Analysts said the details of the trade report were stronger
than the disappointing headline.
 "The trade balance stayed in surplus - just barely - for
the second straight month after nine months in deficit," said
Jonathan Basile, economist at Credit Suisse, noting that
exports and imports are "starting Q1 on a very strong note...
indicative of strong global and Canadian domestic activity."
 Other factors hurting the Canadian dollar on Thursday
included a slide in U.S. crude oil prices and safe-haven buying
of the U.S. dollar. That safe-haven move was in line with stock
market declines spurred by a Moody's downgrade of Spanish debt,
which reignited worries over the euro zone debt crisis.
 The risk-off sentiment sent Canadian government bond prices
higher across the curve.
 The two-year bond CA2YT=RR was up 2 Canadian cents to
yield 1.872 percent, while the 10-year bond CA10YT=RR rose 6
Canadian cents to yield 3.392 percent.
 (Reporting by Ka Yan Ng, Editing by Chizu Nomiyama and Peter
Galloway)