CANADA FX DEBT-C$ weakens after soft U.S. retail data

Wed May 13, 2009 9:39am EDT
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 * Weak U.S. data dampens risk appetite
 * Higher oil prices cushion C$'s fall
 * Bond prices higher across the curve
 By Frank Pingue
 TORONTO, May 13 (Reuters) - Canada's currency was slightly
lower versus the U.S. dollar on Wednesday as U.S. data dimmed
hopes for an economic recovery and lessened demand for
perceived riskier assets, offsetting the benefit of higher oil
 The Canadian dollar tumbled as low as C$1.1670 to the U.S.
dollar, or 85.69 U.S. cents, shortly after the U.S. data, which
showed retail sales in the United States dropped for the second
straight month in April. [ID:nN12361802]
 But a higher price for oil, a key Canadian export whose
price often influences action, helped the Canadian currency
reclaim some of the post-data losses as it rose above $59 a
barrel. [ID:nSIN127415]
 "The (U.S.) dollar got a bit of a leg up on weaker data,
sort of the risk on, risk off switch back in the off position,"
said Shaun Osborne, chief currency strategist TD Securities.
 "But we are seeing the financial situation globally improve
and I think that sort of undermines the safe haven demand ...
premium of the U.S. dollar."
 Earlier this week the Canadian dollar had rallied to its
highest level in over six months given signs that the global
economic decline may at least be troughing.
 By 9:20 a.m. (1320 GMT), the Canadian dollar had recovered
somewhat to C$1.1645 to the U.S. dollar, or 85.87 U.S. cents,
still down from C$1.1620 to the U.S. dollar, or 86.06 U.S.
cents, at Tuesday's close.
 Canadian bond prices followed the bigger U.S. Treasury
market higher across the curve, reclaiming some of the previous
session's drop, after the weaker-than-expected report on retail
sales triggered demand for more secure government debt.
 With no key Canadian data due out until later in the week,
domestic bonds are likely take their direction from their U.S.
counterparts and equities.
 The next economic indicator ECONCA that may influence
Canadian bonds is Friday's Canadian manufacturing survey for
 The benchmark two-year Canadian government was up 1
Canadian cent at C$100.27 to yield 1.118 percent, while the
10-year bond rose 21 Canadian cents to C$105.51 to yield 3.107
 The 30-year bond was up 35 Canadian cents at C$118.85 to
yield 3.890 percent.
 (Editing by Jeffrey Hodgson)