CANADA FX DEBT-C$ falls on weak data, US stock market drop

Mon Dec 20, 2010 10:35am EST
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 * C$ falls to 97.94 U.S. cents
 * Government bond prices up across curve
 * Canada wholesale trade weaker than expected
 (Recasts after wholesale trade data)
 By Claire Sibonney
 TORONTO, Dec 20 (Reuters) - The Canadian dollar retreated
against its U.S. counterpart on Monday morning after Canadian
wholesale trade figures came in below expectations and U.S.
equity markets reversed gains.
 The Canadian currency fell as low as C$1.0210 against the
U.S. dollar, or 97.94 U.S. cents, almost a penny lower than
Friday's close after U.S. indexes declined, weighed by the
information technology sector. [.N]
 As well, wholesale trade was flat in October from the month
before -- versus calls for a 0.8 percent increase --  as auto
sector-led gains were offset by a sharp drop in demand for
machinery and equipment. [ID:nN20186706]
 South of the border, the Federal Reserve Bank of Chicago's
national activity index slipped in November, which also dragged
on market sentiment. [ID:nNLLKNE6Q8]
 "We had weak data from Canada, weak data from the U.S. so
that hasn't boded that well for the Canadian dollar," said
Camilla Sutton, chief currency strategist at Scotia Capital.
 "We haven't really seen a ton of market activity across the
board so things feel very quiet ... it feels like we're much
closer to Christmas holidays than we actually are."
 Early in the session, the Canadian currency drew mild
support from firmer commodity prices and positive equity
markets overseas.
 However, tensions in the Korean peninsula and euro zone
concerns were also seen keeping investors wary, but had limited
tangible impact on the Canadian dollar. [ID:nL3E6NK01M] [FRX/]
 Despite threats of war by Pyongyang, South Korea launched
live-fire drills on a disputed island after an emergency U.N.
Security Council meeting failed to agree on how to defuse the
 "It's amazing how we've just brushed off Korea," added
Sutton. "In terms of Europe, I think the market is very focused
on headline risk, but all in all there hasn't been anything
concrete enough to shift euro out of its month-to-date trading
 At 10:30 a.m. (1530 GMT), the Canadian dollar CAD=D4 was
at C$1.0198 to the U.S. dollar, or 98.06 U.S. cents, down from
Friday's close at C$1.0128 versus the greenback, or 98.74 U.S.
 Canadian government bond prices extended gains following
the soft wholesale trade data.
 The two-year bond CA2YT=RR rose 7 Canadian cents to yield
1.610 percent, while the 10-year bond CA10YT=RR climbed 36
Canadian cents to yield 3.141 percent.
 Looking to the rest of the week, the Canadian consumer
price index report for November on Tuesday will likely be the
highlight of the week, although retail sales and gross domestic
product figures for October may also sway the currency.
 Inflation has been lower than expected for much of the
year, so markets are looking for reassurance the trend won't
suddenly be reversed. Such reassurance would leave the central
bank in a comfortable position to hold its key interest rate
unchanged at 1 percent for at least the first quarter of 2011.
For details, see [ID:nN17250600] ECONCA
 (Additional reporting by Ka Yan N; editing by Peter Galloway)