CANADA FX DEBT-C$ firms despite retail sales disappointment

Tue Mar 22, 2011 10:07am EDT
 
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   * Currency at C$0.9785 vs the U.S. dollar, or $1.0220
 * Bond prices fall as geopolitical worries ease
 (Updates with details)
 By Solarina Ho
 TORONTO, March 22 (Reuters) - Supported by steady commodity
prices, the Canadian dollar was higher against its U.S.
counterpart on Tuesday morning, but off its highs as Canadian
retail sales data for January came in lower than expected.
 Retail sales fell by 0.3 percent in January from December,
dragged lower by weaker new-car sales, Statistics Canada said.
[ID:nN22154488]
 Other data showed Canada's leading indicator for February
was up 0.8 percent from January on strength in the
manufacturing sector but that was insufficient to offset the
impact of the retail figures.
 January was the second straight monthly decline in retail
sales and contrasted to the 1.0 percent rise that had been
forecast. The data signaled that the Canadian economy has not
fully recovered from the global financial crisis and could help
refine expectations on when the Bank of Canada might raise
interest rates.
 Primary-dealer forecasts for a rate increase were largely
split between its May 31 and July 19 policy announcement dates,
according to a Reuters poll last week. [ID:nN18126761]
 The currency CAD=D4 fell to C$0.9785 to the U.S. dollar,
or $1.0220, from C$0.9756, or $1.0250, just before the data was
released at 8:30 a.m. (1230 GMT).
 The currency was still up from its Monday close of
C$0.9797, or $1.0207, as commodity prices held steady and
overseas stock markets firmed.
 "Equity valuation ... that's contributing to stable pricing
in crude and gold, more of an appetite for risk-related carry
trades and the Canadian dollar is benefiting from that flow,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.
 Canada's minority Conservative government will release the
budget after markets close on Tuesday, which could introduce
some political risk for the currency.
 If the opposition rejects the budget, an election would be
called, though Conservatives were seen as making a number of
11th-hour concessions in a bid to avert such a scenario.
[ID:nN218894]
 Canadian bond prices fell across the curve, in step with
U.S. Treasuries, which slipped as investors pushed world stock
markets higher and brushed aside worries over Libya and Japan
in the absence of new geopolitical developments. [US/]
 The interest rate-sensitive two-year bond CA2YT=RR was
down 5.5 Canadian cents to yield 1.712 percent, while the
10-year bond CA10YT=RR fell 23 Canadian cents to yield 3.246
percent.
 (Editing by Peter Galloway)