CANADA FX DEBT-C$ closes softer after touching 3 1/2 year high

Thu Apr 21, 2011 5:02pm EDT
 
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   * C$ closes at C$0.9537, or $1.0485
 * Currency stumbled after weak retail sales 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 closed
slightly lower against the greenback on Thursday, with many
traders selling to lock in gains on long positions after the
currency soared to a 3-1/2 year high earlier in the day.
 The Canadian unit jumped as high as C$0.9455 to the U.S.
dollar, or $1.0576, early in the session, the highest level
since November 2007. The move was part of broad-based decline
in the U.S. currency that took it close to an all-time trough
against major currencies. [FRX/]
 But the Canadian dollar pared gains throughout the day,
with traders moving to close out positions ahead of the Good
Friday/Easter holiday long weekend.
 "You had a really good push down in broad U.S. dollar rates
for the week and obviously people are going, 'That's it, I'm
booking my profits and going home for a very long weekend,'"
said John Curran, senior vice president at CanadianForex.
 "The market has set itself up for further U.S. dollar
weakness ... but it's probably going to be overdone in the
short term."
 The Canadian dollar CAD=D4 finished at C$0.9537 to the
U.S. dollar, or $1.0485, weaker than the C$0.9533 to the U.S.
dollar North American close on Wednesday.
 The Canadian dollar also stumbled after data showed retail
sales in February rose a less-than-expected 0.4 percent, with
the bulk of the gains coming from gasoline stations.
CARSLS=ECI ECONCA
 Yet many analysts and traders said the currency still
seemed to be on a strengthening trend that would take it closer
to the modern-day high it reached it reached in November, 2007.
That month it hit C$O.9059 to the greenback, or $1.1039,
according to Thomson Reuters dealing data.
 "(Retail sales data) is really not affecting too much of
the trend here. This is going to continue on for some time,"
said C.J. Gavsie, managing director of foreign exchange sales
at BMO Capital Markets.
 "I do think retail sales number is being pushed aside for
the headline CPI number we got a couple of days ago."
 The currency accelerated its upward march after data on
Tuesday showed Canada's annual inflation rate in March jumped
to its highest level since September 2008, ratcheting up
pressure on the Bank of Canada to resume raising interest rates
soon. [ID:nN19274146]
 Expectations of higher interest rates often strengthen
currencies because they tend to attract capital flows. The Bank
of Canada's key policy rate is at 1 percent. The U.S. Federal
Reserve continues to keep rates there near zero.
 FEW C$ BARRIERS AHEAD
 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.
 Rising resource prices also provided support for the
commodity-linked currency, with gold hitting a record high
above $1,500 an ounce and U.S. crude maintaining levels above
$110 a barrel. [O/R] [GOL/]
 Canadian bonds closed firmer on Thursday. The two-year bond
CA2YT=RR climbed half a Canadian cent to yield 1.806 percent,
while the 10-year bond CA10YT=RR rose 30 Canadian cents to
yield 3.291 percent.
 (Editing by Jeffrey Hodgson)