Canadian dollar flat on spillover concerns

Thu Feb 21, 2008 9:46am EST
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 By John McCrank
 TORONTO, Feb 21 (Reuters) - The Canadian dollar was almost
unchanged against a generally weaker U.S. dollar on Thursday,
as investors remained concerned that the economic downturn in
Canada's biggest trading partner could spill across the
 Domestic bond prices, with no domestic data to influence
direction, were mixed.
 At 9:30 a.m. (1430 GMT) the Canadian dollar was at C$1.0128
to the U.S. dollar, or 98.74 U.S. cents, up slightly from
C$1.0130 to the U.S. dollar, or 98.72 U.S. cents, at
Wednesday's close.
 "Generally speaking, the U.S. dollar is a bit softer today,
but Canada seems to be the exception to that," said Adam Cole,
currency strategist at RBC Capital Markets in London.
 "The assumption is that the Canadian and U.S. economies are
joined at the hip."
 The Canadian dollar has been mostly rangebound for several
weeks now, first trading around the parity level, and then
moving into the C$1.01 range after some weaker than expected
data last week.
 The currency has been supported to some degree by strong
oil prices, which rose on Wednesday to a record high of $101.32
a barrel.
 Canada is a major energy producer and exporter and much of
the currency's 60 percent rise since 2002 has been attributed
to the run-up in crude prices.
 But in the current environment of market unease, high
energy prices are being seen as potentially negative for global
growth, and are limiting the gains in the Canadian dollar.
 Looking ahead, retail trade data for December is due on
Friday, and will be watched for any signs of weakness spilling
over into the Canadian economy from the U.S. downturn.
 "There is a general assumption that the domestic economy in
Canada is still very strong and in that sense, the Canadian
dollar will be vulnerable to any kind of downside surprise,"
said Cole.
 With no key domestic data to consider, Canadian bond prices
were mixed, largely following moves in the bigger U.S. Treasury
 The overnight Canadian Libor rate LIBOR01 was 3.9183
percent, down from 3.9367 percent on Wednesday.
 Wednesday's CORRA rate CORRA= was 3.9979 percent, down
from 3.9865 percent on Tuesday. The Bank of Canada publishes
the previous day's rate at around 9 a.m. daily.
 The two-year bond fell 12 Canadian cents to C$101.75 to
yield 3.219 percent. The 10-year bond rose 10 Canadian cents to
C$100.66 to yield 3.913 percent.
 The yield spread between the two- and 10-year bond was 69.6
basis points, down from 77.7 basis points at the previous
 The 30-year bond gained 36 Canadian cents to C$112.76 to
yield 4.235 percent. In the United States, the 30-year Treasury
yielded 4.566 percent.
 The three-month when-issued T-bill yielded 3.26 percent, up
from 3.25 percent at the previous close.
 (Editing by Renato Andrade)