June 10, 2009 / 9:04 PM / in 8 years

CANADA FX DEBT-C$ falls on signs of weak Canada economy

* C$ finishes down at 90.25 U.S. cents

* April trade gap, falling house prices weigh on sentiment

* Bonds track U.S. Treasuries lower (Updates to session close, adds details, quotes)

By Jennifer Kwan

TORONTO, June 10 (Reuters) - The Canadian dollar fell against the greenback on Wednesday, pressured by weak trade and housing data as well as by strength in the U.S. currency.

The currency finished the session at C$1.1080 to the U.S. dollar, or 90.25 U.S. cents, down from C$1.1032 to the U.S. dollar, or 90.65 U.S. cents, on Tuesday.

The currency fell on signs of economic weakness in a report showing the export-dependent country's trade balance spun into deficit in April for the third month since December. The impression was reinforced by data showing prices of new Canadian houses dropped in April by the most in almost two decades. [ID:nN10372960]

As a trading nation, when you see the emergence of a trade deficit it's a "sign that the Canadian economy continues to reel" from recession, said Michael Gregory, senior economist at BMO Capital Markets in Toronto.

Also weighing on the Canadian unit was the U.S. dollar, which rose against the euro after the release of the U.S. Federal Reserve's Beige Book, which suggested the economic contraction was moderating in some regions of the country. [ID:nWEQ001087]

It's also possible that rising U.S. Treasury yields were making investors "nervous and buying U.S. dollars as a hedge," said Gregory.

"(U.S. Treasury) yields are rising and that could choke off any kind of greenshoots that are emerging in the economy," he said.

The Canadian dollar's losses were cushioned somewhat by strength in the price of oil CLc1, a key Canadian export, which settled higher at above $71 a barrel.[ID:nSP430902]

BONDS LOWER

Canadian bond prices were lower, following the U.S. Treasuries market, where the 10-year yield rose to 4.0 percent for the first time in eight months, after an auction heightened concerns about the ballooning U.S. budget deficit. [ID:nN10531900]

"There's pressure from the U.S.," said Gregory, but he noted there are also supply concerns lingering in Canada.

The benchmark two-year government bond was down 15 Canadian cents at C$99.65 to yield 1.433 percent, while the 10-year bond fell 93 Canadian cents to C$100.80 to yield 3.653 percent.

The 30-year bond sank C$1.45 to C$ 114.65 to yield 4.113 percent. The comparable U.S. Treasury issue yielded 4.7661 percent.

Canadian bonds mixed against U.S. Treasuries across the curve. The Canadian 30-year bond, which outperformed its U.S. counterpart, was 65 basis points below the U.S. 30-year yield, compared with about 62 basis points on Tuesday.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below