Canadian dollar dips on weak trade data, bonds sag
TORONTO, Feb 14 (Reuters) - The Canadian dollar slipped against the U.S. dollar on Thursday, after data showed that Canada's trade surplus with the rest of the world fell to its lowest point in nine years in December.
Domestic bond prices remained lower after the data.
At 9:32 a.m., the Canadian dollar was at US$1.0010, valuing a U.S. dollar at 99.90 Canadian cents, down from US$1.0030, valuing a greenback at 99.70 Canadian cents at Wednesday's close.
The currency spent the overnight session in a tight range of US$1.0006 and US$1.0055, was knocked slightly lower by the disappointing trade data, and then slid back into the range.
"It looks like we're stuck on either side of parity for now as the market tries to grasp what the underlying themes are in currencies," said Camilla Sutton, currency strategist at Scotia Capital.
The trade numbers were expected to fall, as the U.S. economic downturn and a high Canadian dollar curbed exports, but the December surplus of C$2.35 billion came in well below the C$3.4 billion market forecast.
Statistics Canada releases its survey of manufacturing for December 2007 on Friday, which is expected to show a decline of 0.1 percent due to the economic woes of Canada's biggest trading partner.
Those economic woes will be front and center later in the session on Thursday, as U.S. Federal Reserve Chairman Ben Bernanke testifies on the state of the U.S. economy and financial markets before the Senate Banking Committee.
Also coming later in the session, the Canadian central bank will release its quarterly Bank of Canada Review, a publication featuring articles related to the Canadian economy and to central banking.
Canadian bond prices were lower after the trade data, but the market reaction was muted.
The trade numbers are often revised and are also susceptible to big swings in either direction, said Max Clarke, economist at IDEAglobal in New York.
"I think market is more poised to care about manufacturing sales data tomorrow than the data today," said Clarke.
The overnight Canadian Libor rate LIBOR01 was at 3.9550 percent, down from 3.9917 percent on Wednesday.
Wednesday's CORRA rate CORRA= was 3.989 percent, up from 3.981 percent on Tuesday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond fell 1 Canadian cent to C$102.01 to yield 3.080 percent. The 10-year bond slid 19 Canadian cents to C$100.77 to yield 3.900 percent.
The yield spread between the two- and 10-year bond was 82.0 basis points, up from 78.8 basis points at the previous close.
The 30-year bond dropped 78 Canadian cents to C$111.72 to yield 4.293 percent. In the United States, the 30-year Treasury yielded 4.603 percent.
The three-month when-issued T-bill yielded 3.26 percent, unchanged from the previous close. (Editing by Renato Andrade)
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