4 Min Read
* 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.