CANADA FX DEBT-C$ slips on data, bonds retain safety bid

Wed Mar 16, 2011 10:00am EDT
 
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 * C$ falls to $1.0146
 * Bonds maintain safety bid
 * Canada factory sales leap, U.S. housing starts dive
 TORONTO, March 16 (Reuters) - The Canadian dollar was
slightly lower against the U.S. currency on Wednesday morning
as Japan's nuclear crisis and clashes in Bahrain were weighed
against a mixed bag of data.
 The currency, an outperformer overnight after a volatile
session on Tuesday, eked out a brief gain after Canadian
manufacturing sales data showed a much greater-than-expected
4.5 percent jump in January from December.
 The increase dwarfed analysts' predictions of a 1.0 percent
rise. Sales in January hit C$47.7 billion, the highest level
since October 2008. It was also a bright spot following a spate
of soft Canadian data that has helped scale back expectations
of any interest rate hikes before midyear. [ID:nN16104517]
ECONCA BOCWATCH
 But figures on Wednesday morning also showed U.S. housing
starts dived 22.5 percent in February, the largest monthly fall
in 27 years, while U.S. producer prices surged in February and
pointed to inflationary pressures, which could affect the
outlook for U.S. interest rate hikes.
 "Everything is shifting now after we got very weak data
from the U.S. in terms of housing starts, well below consensus,
well below historical averages. It just highlights the ongoing
themes for the U.S. dollar," said Camilla Sutton, chief
currency strategist, at Scotia Capital.
 At 9:33 a.m. (1333 GMT), the Canadian dollar CAD=D4 was
at C$0.9856 to the U.S. dollar, or $1.0146, down from Tuesday's
close of C$0.9840 to the U.S. dollar, or $1.0163.
 Sutton said recent congestion in the C$0.9770 area would
represent U.S. dollar support, while the 50-day moving average
of C$0.9866 marks the initial place for U.S. dollar
resistance.
 Trouble in Bahrain and concerns about euro zone debt
weighed on risk sentiment, but sent oil prices higher and gave
minor support to the commodity-linked Canadian dollar.
 Developments in Japan's nuclear crisis were being closely
watched and considered an ongoing risk, but analysts were
increasingly acknowledging that the impact on global growth
would probably be relatively limited.
 Government bond prices rose on doubts over the strength of
the economic recovery, and as equity markets were under
pressure.
 The two-year Canadian government bond CA2YT=RR was up 8
Canadian cents to yield 1.588 percent, while the 10-year bond
CA10YT=RR advanced 50 Canadian cents to yield 3.141 percent.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)