CANADA FX DEBT-C$ near 3-1/2 yr high, pares some gains post-data

Thu Apr 21, 2011 10:27am EDT
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   * C$ trims gains to $1.0576 after soft retail data
 * Bonds mostly firmer across curve
 * Next major technical level seen at C$0.9430
 (Updates details, adds analyst comment)
 By Solarina Ho
 TORONTO, April 21 (Reuters) - The Canadian dollar hit a
3-1/2 year high on Thursday as part of an across-the-board exit
of the U.S. currency, though it pared some gains following
unexpectedly weak Canadian retail sales data.
 The Canadian unit jumped as high as C$0.9455 to the U.S.
dollar, or $1.0576, early in the day, the highest level since
November 2007.
 It retreated slightly after overall retail sales figures
for February rose a less-than-expected 0.4 percent, with the
bulk of the gains coming from gasoline stations. CARSLS=ECI
 But traders said the currency still seemed to be on a
strengthening trend that would take it closer to the modern-day
high it reached it reached in November, 2007. That month it hit
C$O.9059 to the greenback, or $1.1039, according to Thomson
Reuters dealing data.
 "(Retail sales data) is really not affecting too much of
the trend here. This is going to continue on for some time,"
said C.J. Gavsie, managing director of foreign exchange sales
at BMO Capital Markets.
 "Those that are following this trend and betting on it are
starting to take profits down here below C$0.9500, but it's one
where I do think retail sales number is being pushed aside for
the headline CPI number we got a couple of days ago."
 The currency accelerated its upward march after data on
Tuesday showed Canada's annual inflation rate in March jumped
to its highest level since September 2008, ratcheting up
pressure on the Bank of Canada to resume raising interest rates
soon. [ID:nN19274146]
 Expectations of higher interest rates often strengthen
currencies because they tend to attract capital flows. The Bank
of Canada's key policy rate is at 1 percent. The U.S. Federal
Reserve continues to keep rates there near zero.
 At 9:45 a.m. (1345 GMT), the Canadian dollar CAD=D4 was
at C$0.9506 to the U.S. dollar, or $1.0520, still up from
C$0.9533 to the U.S. dollar at Wednesday's North American
 Having broken through the C$0.95 level, analysts say there
are few technical barriers in the way of the Canadian dollar.
 Gavsie was looking for C$0.9430 -- last reached in November
2007 -- as the next technical level to watch for. But he
cautioned that profit-taking from those in long-Canadian dollar
positions could cut the rising pace of the currency's
 "We're still in a pretty good uptrend. The Canadian dollar
is benefiting from the stampede into risk-seeking on the back
of a much weaker U.S. dollar," said Michael O'Neill, managing
director at Knightsbridge Foreign Exchange.
 Rising commodity prices continued to also provide
underlying support for the commodity currency, with gold prices
holding above $1,500 an ounce and U.S. crude maintaining levels
above $110 a barrel. [O/R] [GOL/]
 Strong U.S. corporate earnings also buoyed risk appetite in
illiquid pre-Easter trade, threatening to drive the broadly
weaker greenback to historic lows against a basket of
currencies. [ID:nLDE73K0TJ] [FRX/]
 Canadian bonds were mostly firmer after the retail sales
data. The two-year bond CA2YT=RR firmed half a Canadian cent
to yield 1.806 percent, while the 10-year bond CA10YT=RR rose
22 Canadian cents to yield 3.302 percent.
 (With additional reporting by Ka Yan Ng; editing by Jeffrey