Canadian dollar bounces on manufacturing data
* Canadian dollar lifts from overnight weakness after data
* Manufacturing data stronger than expected in June
* Bonds nearly unchanged, lag U.S. Treasuries
By Ka Yan Ng
TORONTO, Aug 15 (Reuters) - Stronger-than-expected Canadian manufacturing figures helped lift the country's dollar from overnight weakness versus the U.S. dollar on Friday, while bond prices were nearly unchanged.
At 10:07 a.m., the Canadian dollar was at C$1.0624 to the U.S. dollar, or 94.13 U.S. cents, up from C$1.0633 to the U.S. dollar, or 94.05 U.S. cents, at Thursday's close.
The U.S. dollar rallied against many major currencies overnight, including the Canadian dollar.
But as data showed Canadian manufacturing sales rose by a stronger-than-expected 2.1 percent in June from May, the Canadian dollar gained as well, said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"The Canadian dollar is rallying on the back of better-than-expected manufacturing data," he said.
The currency rose to C$1.0585 to the U.S. dollar, or 94.47 U.S. cents, immediately after the release of the data, but has since pared gains. The strength in manufacturing, which directly accounts for about one-fifth of all economic activity, topped expectations of a 1 percent rise in sales.
Doug Porter, deputy chief economist at BMO Capital Markets, said the Canadian dollar, while initially weakening, has made an important reversal.
"Today's data certainly didn't hurt. I think the other point here is that the Canadian dollar has been quietly holding up better than some of the other currencies while the U.S. dollar has been recovering," said Porter.
"That's really shining through today."
Market watchers will get more data next week, with the June wholesale trade report on Tuesday, June retail sales data on Wednesday and the July consumer price index release on Thursday.
The reports should give market participants some insight into the Bank of Canada's upcoming interest rate decisions. Its last three policy announcement dates this year are Sept. 3, Oct. 21 and Dec 9.
Canadian bond prices were nearly unchanged across the curve.
Porter said Canadian bonds were lagging their U.S. counterparts partially because of the strong manufacturing figures and interest rate expectations.
With the Canadian dollar softening recently, it might not give the Bank of Canada quite as free a hand to cut rates as the markets believe, Porter said.
The two-year bond fell 1 Canadian cent to C$101.69 to yield 2.770 percent. The 10-year bond slipped 5 Canadian cents to C$105.45 to yield 3.582 percent.
The yield spread between the two-year and 10-year bond was 81.5 basis points, from 83.5 basis points at the previous close.
The 30-year bond added 17 Canadian cents to C$116.82 for a yield of 4.010 percent. In the United States, the 30-year treasury yielded 4.488 percent.
The three-month when-issued T-bill yielded 2.55 percent, up from 2.45 percent at the previous close.
(Reporting by Ka Yan Ng; Editing by Jeffrey Jones)
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