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
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 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
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