CANADA FX DEBT-Canadian dollar sags after inflation data

Thu Dec 17, 2009 7:54am EST
 
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 * C$ sags to 93.33 U.S. cents
 * Annual inflation rate rose to 1.0 percent in November
 * Currency hits 3-week low overnight as greenback climbs
 By Jennifer Kwan
 TORONTO, Dec 17 (Reuters) - Canada's dollar fell against
the U.S. currency on Thursday after domestic inflation data
came in above expectations, but analysts predicted the Bank of
Canada would keep interest rates unchanged for now.
 The Canadian currency, which touched a near three-week low
overnight, sagged to about C$1.0725 to the U.S. dollar, 93.24
U.S. cents, from around C$1.0718 to the U.S. dollar just before
the data's release.
 Canada's annual inflation rate rose to 1.0 percent in
November from 0.1 percent in October, above the 0.8 percent
analysts had expected, primarily due to higher gasoline prices,
Statistics Canada said on Thursday. The core annual inflation
rate -- closely watched by the Bank of Canada -- dropped to 1.5
percent from 1.8 percent in October.
 [ID:nN17155952]
 There was "almost no reaction from the FX markets. It was
slightly above expectations, but this will not alter the stance
from the Bank of Canada's perspective and that is what the
market would be more concerned about," said Matthew Strauss,
senior currency strategist, RBC Capital Markets.
 At 7:37 a.m. (1237 GMT), the Canadian dollar was at
C$1.0715 to the U.S. dollar, or 93.33 U.S. cents, down from
Wednesday's finish at C$1.0605 to the U.S. dollar, or 94.30
U.S. cents.
 Overnight, the Canadian currency dropped to C$1.0739 to the
U.S. dollar, or 93.12 U.S. cents, its lowest level since Nov.
27.
 The weakness was largely due to a broadly stronger U.S.
dollar, which rose to a three-month high against a currency
basket on Thursday as the euro slid on concerns about Greece's
fiscal health. [FRX/]
 Oil prices, a key Canadian export, dropped below $72 a
barrel, while gold and base metals were also lower. [O/R]
[GOL/] [MET/L]
 Canadian bond prices were largely flat at the short end but
higher at the long end, following U.S. Treasuries up in Europe
on Thursday, supported by the prospect of interest rates
staying low for a long time and safe-haven flows. [US/]
 (Reporting by Jennifer Kwan; Editing by Theodore d'Afflisio)