CANADA FX DEBT-C$ escapes volatile session with higher close
* C$ moves in wide range through session
* Trade data offers early bid to C$
* Bond prices slide across curve (Recasts)
By Frank Pingue
TORONTO, May 12 (Reuters) - The Canadian dollar eked out a small gain versus the U.S. dollar in volatile dealings on Tuesday despite a decline in oil and equity prices that dulled risk appetite.
The currency got a big early boost from a report that showed Canada's trade surplus rose in March, but much of the move higher was undone after a closer look at the report showed imports and exports both fell. [ID:nN11501985]
"The trade data at first blush was a positive influence on the Canadian dollar but it was short-lived because underlying imports and exports both fell so it wasn't reason unto itself to buy the Canadian dollar," said Jack Spitz, managing director of foreign exchange at National Bank of Canada.
"The catalyst to the bid for the Canadian dollar was higher equities and across the board weakness in the U.S. dollar, but that gave way to lower equity valuations, a rejection of $60 crude and a move back to some risk aversion."
The Canadian dollar closed at C$1.1620 to the U.S. dollar, or 86.06 U.S. cents, up from C$1.1658 to the U.S. dollar, or 85.78 U.S. cents, at Monday's close.
Moments after the trade report was released early in the session the currency rallied as high as C$1.1540 to the U.S. dollar, or 86.66 U.S. cents, since the headline surplus number was more than double analysts' expectations.
The currency picked up more steam as equities opened higher but they finished well off their session highs and dragged the Canadian dollar down with them.
The Canadian currency fell as low as C$1.1699 to the U.S. dollar, or 85.48 U.S. cents, which meant it moved in a range of more than 1 U.S. cent through the session.
The price of oil, a key Canadian export, offered support to the Canadian dollar after an early move above $60 a barrel. But oil was unable to hold the gain and that weighed on the currency. [ID:nN12328869]
Some factors cited for keeping the Canadian dollar from slipping further were economic reports from Britain and China that bolstered the view that the global recession is easing, which lessened safe-haven demand for the U.S. dollar.
BOND PRICES LOWER
Bond prices finished down across the curve, relinquishing some of the gains made during the previous session, as the trade data left investors with less interest in secure assets such as government debt.
Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment, also said part of the fall in bond prices could be attributed to institutional accounts that sold some bonds to make room to buy newer issues.
The next economic indicator that may influence Canadian bonds is Friday's Canadian manufacturing survey for March.
The benchmark two-year Canadian government ended down 7 Canadian cents at C$100.26 to yield 1.121 percent, while the 10-year bond slipped 25 Canadian cents to C$105.30 to yield 3.132 percent.
The 30-year bond dropped 45 Canadian cents to C$118.50 to yield 3.908 percent.
Canadian bonds underperformed their U.S. counterparts across most of the curve. The 30-year bond yield was about 25 basis points below the U.S. 30-year yield, compared with around 29 basis points below on Monday. (Editing by Peter Galloway; editing by Peter Galloway)
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