CANADA FX DEBT-C$ weakens after Canadian inflation data

Fri Apr 17, 2009 8:47am EDT
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 * Annual inflation eases in March, core higher
 * Bond prices tilt lower across the curve
 * C$ remains comfortably above March 4-year low
 (Adds details and comments)
 By Frank Pingue
 TORONTO, April 17 (Reuters) - The Canadian dollar eased
slightly versus the U.S. dollar on Friday as domestic inflation
data did little to change expectations that the Bank of Canada
could soon take additional measures beyond interest rate cuts
to stimulate Canada's sagging economy.
 The data showed Canada's annual inflation rate slowed to
1.2 percent in March from 1.4 percent in February, but the core
rate closely watched by the central bank unexpectedly rose to 2
percent. [ID:nN17500487]
 At 8:15 a.m. (1215 GMT), the Canadian unit was at C$1.2115
to the U.S. dollar, or 82.54 U.S. cents, down from C$1.2095 to
the U.S. dollar, or 82.68 U.S. cents, right before the data.
 That also left it down from C$1.2096 to the U.S. dollar, or
82.67 U.S. cents, at Thursday's close.
 The Bank of Canada will announce its interest rate decision
on April 21. Most primary dealers expect it to hold the key
rate steady at 0.50 percent and will watch for hints on whether
the central bank plans to introduce quantitative or credit
easing measures. [ID:nTOR004440]
 "Whatever the Bank of Canada was going to do would've been
largely cast in stone for next week and today's numbers are not
much of a factor," said Mark Chandler, fixed income strategist
at RBC Capital Markets.
 "It would've had to have been well outside of expectations
one way or the other to be a market mover given the path that
the bank is on and it obviously wasn't."
 Chandler said the Bank of Canada is likely more focused on
inflation expectations rather that current inflation figures.
 The modest pullback in the currency left it further away
from the 13-week high it touched early on Thursday after an
upbeat report on Canadian factory sales. But the currency is
still up nearly 8 percent from the four-year low it skidded to
in early March.
 Another weight on the Canadian dollar came from the price
of gold, which added to the previous session's near 2 percent
drop. The price of oil, also a key Canadian commodity whose
price often influences the currency, was little changed.
 Domestic bond prices were slightly lower across the curve,
but their move was contained as North American stocks appeared
headed for a flat open even after some upbeat U.S. corporate
earnings reports.
 Both Citigroup C.N and General Electric GE.N posted
quarterly results that were better than expected, yet U.S.
stock index futures pointed to a flat open. [ID:nN17306900]
 "The feeling is even with better earnings results today,
we've had a good run in equities and there may be a bit of a
correction needed," said Chandler.
 The two-year bond was down 1 Canadian cent at C$100.27 to
yield 1.122 percent, while the 10-year bond slipped 11 Canadian
cents to C$106.76 to yield 2.970 percent.
 The 30-year bond shed 35 Canadian cents to C$122.20 to
yield 3.720 percent. In the United States, the 30-year Treasury
yielded 3.727 percent.
 (Editing by Jeffrey Hodgson)