CANADA FX DEBT-C$ dips on trade data; bonds lower
* C$ down at 90.13 U.S. cents
* Canada posts trade deficit of C$179 mln in April
* Bonds track U.S. Treasuries lower on supply concerns (Recasts, adds details, quote)
By Jennifer Kwan
TORONTO, June 10 (Reuters) - The Canadian dollar edged lower versus the U.S. dollar on Wednesday morning after Canada posted an unexpected trade deficit in April, but the decline was cushioned by higher commodity prices and firmer stock markets.
Statistics Canada said on Wednesday the country posted a trade deficit of C$179 million in April, as a 3.2 percent reduction in prices helped cut the value of exports to an almost 10-year low.
Analysts had on average predicted Canada would run a surplus of C$1.0 billion after a C$1.0 billion surplus in March. [ID:nN10431263]
"The important data release was the trade data that came in weaker than expected, pushing the surplus back into a very small deficit, and the Canadian dollar did react to that," said Matthew Strauss, senior currency strategist, RBC Capital Markets.
"With exports still under pressure that could mean the recovery in Canada would likely be slower than what some people would have hoped for. That reflects negatively on the economy."
At 10:18 a.m. (1418 GMT), the currency was at C$1.1095 to the U.S. dollar, or 90.13 U.S. cents, down from Tuesday's finish at C$1.1032 to the U.S. dollar, or 90.65 U.S. cents.
"The surprise was really that pullback on the (trade) balance for Canada, and I think that's going to predominate trading during the morning," said Andrew Pyle, wealth advisor at Scotia McLeod.
Also on Wednesday, data showed prices of new homes in Canada in April fell by 0.6 percent from March and by 3.0 percent from April 2008, the largest year-on-year decline for more than 17 years. [ID:nN10299734]
Strauss said he expected the currency could draw support from strength in the price of oil CLc1, a key Canadian export, which topped $71 a barrel, as well as steady equity markets.[ID:nSP430902]
"The dominant theme in FX markets remains the global outlook and how equities are reacting to that. That is, whether we're seeing an increased risk appetite or not," Strauss said.
Canadian bond prices were lower, following the U.S. Treasuries market, where long-dated bonds fell as strength in stocks dented the appeal of safe-haven government debt. [ID:nN10333795]
Another factor weighing on prices was supply concerns ahead of U.S. bond auctions this week, said Scotia McLeod's Pyle.
The benchmark two-year government bond was unchanged at C$99.79 to yield 1.358 percent, while the 10-year bond fell 23 Canadian cents to C$101.50 to yield 3.570 percent.
The 30-year bond dropped 60 Canadian cents to C$115.50 to yield 4.067 percent. The comparable U.S. Treasury issue yielded 4.6831 percent. (Editing by Peter Galloway)
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