August 13, 2008 / 1:50 PM / 9 years ago

Canadian dollar falls against stronger greenback

<p>Newly pressed Canadian one dollar coins, also know as loonies, at the Royal Canadian Mint in Winnipeg November 14, 2007. REUTERS/Fred Greenslade</p>

TORONTO (Reuters) - The Canadian dollar fell

against the U.S. dollar on Wednesday, giving up Tuesday’s gains

as investors bought greenbacks in response to deteriorating

growth elsewhere in the world.

Domestic bond prices, with no Canadian data releases to

influence direction, followed the larger U.S. market higher.

At 9:25 a.m., the Canadian dollar was at

C$1.0667 to the U.S. dollar, or 93.75 U.S. cents, down from

C$1.0628 to the U.S. dollar, or 94.09 U.S. cents, at Tuesday’s

close.

On Tuesday, the currency recorded its first gain in seven

sessions as traders booked U.S. dollar profits after its recent

rapid rise. But the Canadian dollar gave back all of its gains

overnight as the greenback resumed its rally.

Data on Wednesday showed Japan’s economy shrank 0.6 percent

in the second quarter, and the Bank of England said it could

cut interest rates sooner, rather than later, to spur growth.

Germany releases its second quarter gross domestic product

figures on Thursday -- a 0.8 percent contraction is expected.

That contrasts to the United States, where stronger than

expected trade data on Tuesday suggested that the U.S. economy

may not be as soft as previously thought.

The greenback’s rally has knocked the Canadian dollar back

6.1 percent since July 21.

Matthew Strauss, senior currency strategist at RBC Capital

Markets, said the Canadian dollar may have moved too fast

against the U.S. one, and was likely to trade fairly flat for

the rest of the week.

BOND PRICES RISE

Bond prices were flat to higher, taking their lead from the

larger U.S. market.

”The data is starting to paint a picture of a much weaker

global economy, with some countries on the cusp of recession,”

said Sal Guatieri, senior economist at BMO Capital Markets.

“That’s providing underlying support.”

The next major Canadian data comes on Friday with the

survey of manufacturing for June.

The overnight Canadian LIBOR rate LIBOR01 was 3.0667

percent, down from 3.070 percent on Tuesday.

Tuesday’s CORRA rate CORRA= was 3.0019 percent, down from

3.0108 percent on Monday. The Bank of Canada publishes the

previous day’s rate at around 9 a.m. daily.

The two-year bond rose 2 Canadian cents to C$101.80 to

yield 2.713 percent. The 10-year bond climbed 3 Canadian cents

to C$105.40 to yield 3.590 percent.

The yield spread between the two-year and 10-year bond was

87.1 basis points, down from 107 basis points at the previous

close.

The 30-year bond added 10 Canadian cent to C$116.50 for a

yield of 4.027 percent. In the United States, the 30-year

treasury yielded 4.533 percent.

The three-month when-issued T-bill yielded 2.50 percent,

unchanged from the previous close.

Editing by Janet Guttsman

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