CANADA FX DEBT-C$ falls with oil prices, equities eyed

Fri Nov 14, 2008 9:47am EST
 
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 * C$ slides 0.8 percent
 * Canada manufacturer shipments unexpectedly up 0.1 pct
 * Bond prices rise on weak U.S. retail sales data
 By John McCrank
 TORONTO, Nov 14 (Reuters) - The Canadian dollar fell
against the U.S. dollar on Thursday, giving back some of the
big gains from the previous session as oil prices retreated
overnight.
 Canadian bond prices rose in a safe haven bid along with
the larger U.S. market after data showed record low U.S. retail
sales numbers for October.
 At 9:20 a.m. (1420 GMT) the Canadian dollar was at C$1.2210
to the U.S. dollar, or 81.90 U.S. cents, down from C$1.2115 to
the U.S. dollar, or 82.54 U.S. cents, at Thursday's close.
 The currency fell 0.8 percent, unwinding some of its 2.1
percent gain in Thursday's North American session.
 That rally was sparked by a late surge in the equities
markets and in commodity prices.
 Canada is a major exporter of many key commodities,
including oil, which was up 4 percent on Thursday but fell
around 2.75 percent overnight.
 "I think the markets are waiting to see if yesterday's move
was really just a short squeeze, or the start of some kind of
base building into yearend in equities," said Shane Enright,
currency strategist at CIBC World Markets.
 "You've got a lot of things that are encouraging, but you
have to build upon them to really get a genuine asset market
recovery to come, and when that happens, you will see weakness
in the U.S. dollar, I think, and broader currency strength
elsewhere."
 On the Canadian data front, Statistics Canada said
shipments by Canadian manufacturers unexpectedly rose by 0.1
percent in September from August, driven by strong demand from
the aerospace industry.
 Analysts in a Reuters poll had forecast a 1.5 percent drop
in sales on fallout from the U.S. economic slowdown, which
caused sales to tumble 3.7 percent in August.
 South of the border, U.S. data showed a record decline in
retail sales in October -- a 2.8 percent slide. Sales excluding
autos were down a record 2.2 percent, versus market
expectations of a 1.2 percent fall.
 BOND PRICES RISE
 Canadian bond prices rose along with the U.S. Treasury
market, largely due to the U.S. data, which ignited a safe
haven rally for government debt.
 "(U.S.) retail sales are looking quite grim," said Eric
Lascelles, chief economics and rates strategist at TD
Securities.
 "The minus 2.2 percent is just the tip of the iceberg
there. There's such a breadth of weakness in the details of the
report that just suggests the U.S. is going to be in a
sustained decline and that's going to weigh on central bank
rates, not just in the U.S. .., but in Canada as well."
 The Canadian overnight Libor rate LIBOR01 was 2.4667
percent, down from 2.5583 percent on Thursday.
 Thursday's CORRA rate CORRA= was 2.2460 percent, up
slightly from 2.2437 percent on Wednesday. The Bank of Canada
publishes the previous day's rate at around 9 a.m. daily.
 The two-year bond rose 1 Canadian cent to C$101.65 to yield
1.919 percent. The 10-year bond climbed 65 Canadian cents to
C$104.65 to yield 3.667 percent.
 The yield spread between the two- and 10-year bond was 180
basis points, unchanged from the previous close.
 The 30-year bond added C$1.00 to C$112.35 to yield 4.248
percent. In the United States, the 30-year Treasury yielded
4.228 percent.
 (Reporting by John McCrank; editing by Peter Galloway)