CANADA FX DEBT-C$ slides to 1-wk low on trade data, oil fall

Thu Mar 10, 2011 4:53pm EST
 
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 * C$ drops as low as $1.0238, 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
 * Next up: Canada February jobs report
 (Updates to close)
 By Ka Yan Ng
 TORONTO, March 10 (Reuters) - Canada's dollar slid to a
one-week low against the greenback on Thursday, hurt by
retreating oil prices and news the country's trade surplus
narrowed by more than expected, softening expectations of a
near-term interest rate hike.
 Canadian bond prices climbed in a flight to safety, spurred
by euro zone debt concerns and tensions in the Middle East and
North Africa.
 The Canadian dollar CAD=D4 dropped as low as C$0.9768 to
the U.S. dollar, or $1.0238, its weakest since March 2, partly
on data that showed Canada's trade surplus fell much more than
expected to C$116 million in January. [ID:nN10113454]
 That compared to the C$2.6 billion forecast by market
operators. Statistics Canada also revised December's surplus
down to C$1.71 billion from an initial C$3 billion.
 Other factors hurting the Canadian dollar included a slide
in U.S. crude oil prices and safe-haven buying of the U.S.
dollar. The greenback rallied as stock markets dropped after
Moody's downgraded Spanish debt, which reignited worries over
the euro zone debt crisis. [MKTS/GLOB]
 "It's a classic risk-off day where equities and commodities
have been swallowed in a sea of red. Not surprisingly we find
the safe assets of bonds, Treasuries and the U.S. dollar acting
as the main recipient for inflows as investors try to shelter
themselves from the storm," said David Tulk, chief Canada macro
strategist at TD Securities.
 Adding to the negative sentiment, China posted posted a
trade deficit of $7.3 billion for February, its first since
March 2010 and the biggest since February 2004.
[ID:nTOE72903F]
 The Canadian dollar finished at C$0.9756 to the U.S.
dollar, or $1.0250, down almost three-quarters of a cent from
Wednesday's close of C$0.9687 to the U.S. dollar, or $1.0323.
 The two-year bond CA2YT=RR advanced 14 Canadian cents to
yield 1.776 percent, while the 10-year bond CA10YT=RR jumped
55 Canadian cents to yield 3.392 percent.
 RATE HIKE BEFORE MIDYEAR IN QUESTION
 Analysts said the details of the Canadian trade report were
stronger than the disappointing headline, but unlikely to put
the Bank of Canada on track for a rate hike at its next
policysetting on April 12.
 Based on overnight index swaps, markets are pricing in a
92.17 percent probability of no change in rates in April, up
from 90.60 percent just ahead of the trade data, according to a
Reuters calculation. BOCWATCH
 The market is not fully pricing in a hike until the central
bank's September policy-setting date.
 "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.
 Market attention now turns to Friday's Canadian jobs
figures. After stronger-than-expected job creation in January
of 69,200, recouping all the job lost in the recession,
analysts expect hiring to slow to a more modest pace of 21,000
jobs in February. They also see the unemployment rate falling
to 7.7 percent last month from 7.8 percent in January.
[ID:nN04215926]
 (Editing by Jeffrey Hodgson)