CANADA FX DEBT-C$ falls on weak global outlook; bonds gain

Mon Aug 16, 2010 4:37pm EDT
 
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   * C$ falls to 95.73 U.S. cents
 * Bond prices up across curve
 (Updates to close)
 By Claire Sibonney
 TORONTO, Aug 16 (Reuters) - The Canadian dollar slipped
against its U.S. counterpart on Monday after disappointing
economic signals out of Japan and the United States, and
flagging momentum in the domestic housing sector, pressured the
currency despite broad weakness in the greenback.
 The Canadian dollar underperformed across the board,
following a series of soft economic releases, including a very
slight growth figure out of Japan, falling U.S. home builder
sentiment and a U.S. Federal Reserve survey that illustrated
stagnant business and consumer loan demand.
 "When you look at the performance of the Canadian dollar,
it seems to be displaying a very stubborn independent streak
where it's lower against the U.S. dollar, whereas relative to
all the other currencies, the U.S. dollar has depreciated."
said David Tulk, senior macro strategist at TD Securities.
 Also weighing on the domestic currency, data showed sales
of existing homes in Canada fell 6.8 percent in July, almost
entirely because of fewer sales in the big provinces of British
Columbia and Ontario. [ID:nN16264769]
 "I think markets should be able to see through that but it
doesn't seem they're quite willing to do so at this point,"
added Tulk, referring to last month's introduction of
harmonized federal and provincial sales taxes in both
provinces.
 "The fact that the housing market does have this
connotation of being a dangerous part of the economy to be
correcting, I think maybe markets are focusing on that in terms
of Canada."
 Wary investors also struggled to keep equity markets in
positive territory, while crude oil futures ended lower for a
fifth consecutive day.
 The Canadian dollar CAD=D4 closed the North American
session at C$1.0446 to the U.S. dollar, or 95.73 U.S. cents,
down from Friday's finish at C$1.0415 to the U.S. dollar, or
96.02 U.S. cents.
 Matthew Strauss, senior currency strategist at RBC Capital
Markets said key technical levels to watch going forward would
be an intraday level of C$1.0499 and a daily close of the
C$1.0503 double-top and C$1.0503, a descending channel.
 "Until we break above those levels I think we'll most
likely continue to see a range trading broadly speaking around
the C$1.04 level," said Strauss.
 "However, a break above those two levels as a daily close
would clearly indicate that there is new momentum to sell the
Canadian dollar."
 On the support side for the currency, Strauss said breaking
beyond the 200-day moving average of C$1.0390 could see the
Canadian dollar back towards C$1.0111.
 BONDS FOLLOW TREASURIES UP
 Canadian government bond prices firmed, following U.S.
Treasury issues higher, with the U.S. 10-year yield hitting a
17-month low as weak economic growth around the world spurred
talk of deflation. [US/]
 Canada's two-year bond CA2YT=RR was up 3 Canadian cents
to yield 1.358 percent, while the 10-year bond CA10YT=RR
added 42 Canadian cents to yield 2.935 percent.
 However, Canadian bonds mostly lagged their U.S.
counterparts, with the difference between 10-year yields
widening 5.1 basis points to 35.6 basis points.
 "I think Canada is being dragged along to a certain extent
for the ride," said Tulk.
 "It seems (U.S. bonds) are still the safest place to hide."
 (Reporting by Claire Sibonney; editing by Rob Wilson)