CANADA FX DEBT-C$ little changed, bonds slide after trade data

Fri Dec 10, 2010 9:48am EST
 
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 * C$ edges up to 99.06 U.S. cents
 * Long-dated bond prices fall after U.S. trade data
 * EXCLUSIVE-Flaherty-Get used to upward pressure on C$
 (Adds link to Flaherty interview)
 By Ka Yan Ng
 TORONTO, Dec 10 (Reuters) - Canada's currency held higher
against the U.S. dollar on Friday morning after Canadian data
showed the trade deficit shrank in October.
 The currency's muted reaction was probably offset by the
unexpectedly large contraction in the U.S. trade deficit,
analysts said.
 Higher exports helped cut Canada's trade deficit in October
to a smaller-than-expected C$1.71 billion from a revised C$2.31
billion in September, Statistics Canada data showed.
 Market analysts had predicted a deficit of C$2.1 billion in
October. In recent months the high Canadian dollar and weak
U.S. economy have cut demand in the United States, Canada's
biggest export market by far. [ID:nN10267094]
 "Canada's numbers in general were pretty good and the
internal part of it was pretty good as well. The volumes were
encouraging on the exports side. On the imports side, there was
no real big change there," said Mark Chandler, head of Canadian
fixed income and currency strategy at RBC Capital Markets.
 Meanwhile, Canadian Finance Minister Jim Flaherty told
Reuters Insider on Friday that Canada needs to get used to
upward pressure on the Canadian dollar. [ID:nN09266977]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
Reuters Insider show on: link.reuters.com/vet59q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 At 9:15 a.m. (1415 GMT), the Canadian currency CAD=D4 was
at C$1.0095 to the U.S. dollar, or 99.06 U.S. cents, up from
Thursday's North American session close at C$1.0105 to the U.S.
dollar, or 98.96 U.S. cents.
 The currency remained mired in its recent narrow trading
band and was uninspired by strength in world stock markets.
Investors grew more confident about the prospect for economic
recovery following robust Chinese data. [MKTS/GLOB]
 10-YEAR SLIDES ON U.S. TRADE DATA
 Long-dated government bond prices mirrored the drop in
comparably U.S. Treasuries after data showed the U.S. trade
deficit narrowed much more than expected in October.
 The 10-year bond CA10YT=RR fell sharply, down 41 Canadian
cents to yield 3.296 percent, as the smaller-than-expected
deficit could boost estimates of U.S. fourth-quarter economic
growth.
 "(Yields) quite quickly jumped on the story of stronger
U.S. growth. To be honest, it's probably not worth that much
more in terms of additional growth in U.S. numbers but there
just seems to be a bias in the market of that," said Chandler.
 The U.S. trade gap totaled $38.7 billion, compared to a
forecast of about $43.6 billion, and down from a revised
estimate of $44.6 billion for September. [ID:nN09288102]
 Short-dated issues were little changed after the data, with
the two-year bond CA2YT=RR holding flat to yield 1.697
percent.