CANADA FX DEBT-C$ edges higher in muted action, bonds strengthen

Thu May 14, 2009 9:29am EDT
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 * Lower oil prices capping C$'s move
 * Bond prices rally after weak U.S. data
 By Frank Pingue
 TORONTO, May 14 (Reuters) - The Canadian dollar was a touch
higher versus the U.S. greenback on Thursday morning as buying
by traders who feel a recovery is well underway offset a
widespread view that the currency has gotten ahead of itself.
 After a largely uninterrupted charge to a six-month high
earlier this week on hopes the global economic decline may at
least be troughing, the domestic currency took a big step
backwards as some felt its move was overdone.
 But it was largely unchanged from its close in the previous
session as investors awaited some direction from North American
equities, which have been a key factor in its performance.
 "The market is still struggling with the two opposing
forces, the one being the whole green shoot camp that's saying
we are going to see a sharp recovery," said Matthew Strauss,
senior currency strategist at RBC Capital Markets.
 "But since last week the voices from the opposing camp have
became louder that the rally in risky assets has gone too far,
reflecting a too optimistic recovery."
 At 9:10 a.m. (1310 GMT), the Canadian unit was at C$1.1745
to the U.S. dollar, or 85.14 U.S. cents, up from C$1.1759 to
the U.S. dollar, or 85.04 U.S. cents, Wednesday's close.
 The fall from the high earlier this week picked up steam on
Wednesday after data from the United States showed retail sales
fell for the second straight month in April, which dented hopes
the economy would soon emerge from recession. [ID:nN13384420]
 Strauss said the U.S. data was one more factor backing the
argument of those who feel the Canadian dollar, which generally
slides when investors feel less comfortable taking on risk, had
moved too far too fast.
 With no key domestic data ECONCA due until Friday's
manufacturing survey for March. the Canadian currency is likely
to take its direction from equities, oil prices and the U.S.
 The price of oil, a key Canadian export whose price often
influences action, slipped further from a six-month high after
the International Energy Agency forecast global oil consumption
will fall this year. [ID:nSIN503436]
 Canadian bond prices followed the bigger U.S. Treasury
market slightly higher across the curve after data from south
of the border showed an unexpectedly large number of claims for
jobless benefits. [ID:nN14464671]
 The data convinced dealers to snap up more secure assets
like government debt, an area that has been rallying of late
given the selloff in equities.
 The benchmark two-year Canadian government was up 4
Canadian cents at C$100.31 to yield 1.095 percent, while the
10-year bond rallied 12 Canadian cents to C$105.65 to yield
3.091 percent.
 The 30-year bond was up 30 Canadian cents at C$119.65 to
yield 3.848 percent.
 (Editing by Jeffrey Hodgson)