CANADA FX DEBT-C$ finishes lower, bonds up, on U.S. data
* C$ sags to C$1.0998, or 90.93 U.S. cents
* Bond prices rise with U.S. market on U.S. data
* U.S. consumer confidence at lowest level since March
* Canadian manufacturing shipments jump 1.9 pct (Adds details, updates prices)
By Ka Yan Ng
TORONTO, Aug 14 (Reuters) - The Canadian dollar closed lower versus the U.S. currency on Friday, pressured by renewed concerns about economic recovery arising from worsening U.S. consumer confidence data.
The currency's fall centered on the Reuters/University of Michigan preliminary August consumer sentiment survey, which dropped to 63.2 from 66.0 in July, its lowest level since March and well below median expectations for a reading of 68.5. [ID:nN14294408]
"What it has introduced into the market is a bit more caution in terms of just how quickly the U.S. economy is going to rebound," said Paul Ferley, assistant chief economist at Royal Bank of Canada, adding that the confidence report was one of several disappointing data points in recent days.
Earlier this week, U.S. retail sales figures for July unexpectedly slipped and there were more indicators that the weak U.S. labor market was still struggling to stabilize.
The Canadian dollar finished at C$1.0998 to the U.S. dollar, or 90.93 U.S. cents, down sharply from C$1.0890 to the U.S. dollar, or 91.83 U.S. cents, at Thursday's close. For the week, the currency was off 1.6 percent, its second straight week of decline.
The U.S. confidence figures also hit oil and stock markets, adding further pressure to the commodity-linked Canadian currency.
The price of oil, a key Canadian export, dropped below $68 a barrel, while equity markets slumped except for Toronto, which struggled to a small gain in a last-minute rally.
Early in the session, data showing mild U.S. inflation [ID:nN13244265] and a jump in Canadian manufacturing shipments [ID:nN14293720] helped the Canadian dollar edge higher.
Next week's key data will be Canada's consumer price index for July. It is likely to show the inflation rate at negative 0.8 percent, according to a Reuters survey ECONCA, after having its first negative reading since 1994 in June.
"In Canada, CPI inflation wouldn't seem to be worth fretting about," said Avery Shenfeld, chief economist at CIBC World Markets.
"But it's still the only possible barrier to the Bank of Canada keeping its pledge to keep rates on hold until mid-2010, since that pledge already allowed for strong growth in the first half of next year."
Canadian bond prices were higher across the curve, following the U.S. Treasury market as the poor consumer confidence data convinced investors to exit equities and seek the relative safety of government bonds.
Gains began early after the mild U.S. consumer inflation data, which led the market to believe that the U.S. Federal Reserve will keep interest rates low for some time.
The two-year Canadian bond climbed 2 Canadian cents to C$99.35 to yield 1.324 percent, while the 10-year bond rose 20 Canadian cents to C$102.20 to yield 3.482 percent.
The 30-year bond increased 40 Canadian cents to C$117.75 to yield 3.942 percent. In the United States, the 30-year bond yielded 4.429 percent.
Canadian bonds had a mixed performance versus their U.S. counterparts across the curve. The Canadian 30-year bond was about 48.7 basis points below the U.S. 30-year yield, versus 45.5 basis points on Thursday. (Editing by Peter Galloway)
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