September 18, 2009 / 2:24 PM / in 8 years

CANADA FX DEBT-Canadian dollar edges lower, bonds weaken

* C$ at 93.58 U.S. cents

* Gets short-lived pop from wholesale trade figures

* Bonds weaken after Thursday’s rise (Adds commentary, updates prices)

TORONTO, Sept 18 (Reuters) - The Canadian dollar firmed briefly against the U.S. currency on Friday morning after a domestic wholesale trade report came in stronger than expected, but quickly turned lower along with weakening stock markets.

The currency CAD=D3 rose as high as C$1.0666 to the U.S. dollar, or 93.76 U.S. cents, shortly after data showed Canadian wholesale trade rose by 2.8 percent in July from June -- a much bigger increase than analysts had forecast. [ID:nN18247835]

Overnight, the Canadian dollar had fallen 1 U.S. cent to touch a low at 92.85 U.S. cents.

“(The Canadian dollar) did move a little bit but it was a little bit of a delayed reaction,” said J.P. Blais, vice president of foreign exchange products at BMO Capital Markets. “I think we saw some profit-taking overnight with a lot of people caught short U.S. dollars. I think the lack of liquidity accentuated this move a little bit.”

With liquidity thinning ahead of holidays in Japan and Singapore next week, analysts expected more volatility and exaggerated moves on currency markets.

A lower stock market open in Toronto and falling commodity prices were enough pull the Canadian dollar off its slight rise on Friday morning.

At 10:05 a.m. (1405 GMT), the Canadian dollar was at C$1.0686 to the U.S. dollar, or 93.58 U.S. cents, down from Thursday’s session close of C$1.0668 to the U.S. dollar, or 93.74 U.S. cents.

BONDS DROP

Canadian bond prices were lower on Friday morning after Thursday’s rise, tracking a drop on the U.S. Treasury market ahead of next week’s near record amount of new issuance. [ID:nLI230677]

The two-year bond CA2YT=RR slipped 4 Canadian cents to C$99.47 to yield 1.270 percent, while the 10-year bond CA10YT=RR fell 20 Canadian cents to C$103 to yield 3.383 percent. The 30-year bond CA30YT=RR dropped 45 Canadian cents to C$118.65 to yield 3.895 percent. (Reporting by Ka Yan Ng; editing by Peter Galloway)

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