CANADA FX DEBT-C$ slips as US inflation data spurs worry

Fri May 13, 2011 10:39am EDT
 
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 * C$ falls to C$0.9663 to the U.S. dollar, or $1.0349
 * Bond prices rise as risk sentiment modestly higher
 (Updates after U.S. inflation data, market open)
 By Claire Sibonney
 TORONTO, May 13 (Reuters) - Canada's dollar weakened
against the greenback on Friday morning after oil's retreat
from earlier highs sparked wariness about the direction of
commodities and as U.S. April inflation data undermined
confidence in the strength of the economic recovery.
 U.S. consumer prices rose 0.4 percent in April, as
expected, but the increase came on higher food and energy
prices, a trend that was seen as discouraging economic growth.
[ID:nN13186747]
  "Investors realize that if commodity-driven inflation
continues to increase it will have a meaningful negative impact
on the U.S. economy," said Sal Guatieri, senior economist at
BMO Capital Markets.
  U.S. crude oil futures advanced above $100 a barrel in
initial reaction to the U.S. data, but they subsequently pared
gains.
  Energy markets have been on a roller-coaster ride over the
last week as investors have reassessed the outlook for global
growth and the risk of supply disruptions in the Middle East.
[O/R]
 U.S. stock indexes also fell into the red after opening
higher, a move mirrored by the Canadian dollar after the
release of the U.S. data. [.N
  At 9:50 a.m. (1350 GMT), the Canadian dollar CAD=D4 was
at C$0.9663 to the U.S. dollar, or $1.0349, down from
Thursday's North American session close at C$0.9623 to the U.S.
dollar, or $1.0395.
  The currency, which was hovering near 3-1/2-year highs
against the greenback last week, has been caught up in the
recent commodity rout. The Canadian dollar often tracks
commodity prices, and typically is closely correlated with U.S.
oil CLc1 because Canada is the major exporter of oil and gas
to the United States.
 It has traded in a wide range this week, sliding as low as
C$0.9695 to the U.S. dollar on a steep slide in oil and silver
prices early in the week. It rose as high as C$0.9513 to the
U.S. dollar on a commodity price rebound.
"It really is just investors looking for a place to hide
right now after a pretty brutal week," David Tulk, chief Canada
macro strategist at TD Securities, said of Friday morning's
action.
 "You're seeing a little bit of a rebound in commodities but
it's been such a bumpy ride recently that you're just reaching
for the weekend after a very volatile and traumatic week."
  Canadian bond prices were modestly higher, tracking the
rise in safe-haven U.S. Treasuries after the inflation data.
[US/]
 Canada's two-year bond CA2YT=RR was up 5 Canadian cents
to yield 1.705 percent, while the 10-year bond CA10YT=RR
gained 23 Canadian cents to yield 3.209 percent. The 30-year
bond CA30YT=RR advanced 52 Canadian cents to yield 3.599
percent.
 (Reporting by Ka Yan Ng and Claire Sibonney; editing by Peter
Galloway)