CANADA FX DEBT-C$ little changed as G20 meets; bonds flat

Fri Oct 22, 2010 4:50pm EDT
 
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   * C$ ends at 97.38 U.S. cents
 * Bonds largely flat across curve
 * Canadian retail sales up 0.5 pct in August
 * Domestic inflation muted
 (Updates to close, adds quote)
 By Jennifer Kwan
 TORONTO, Oct 22 (Reuters) - The Canadian dollar was flat
versus the U.S. currency on Friday as investors failed to make
any major bets either way amid uncertainty about the outcome of
a meeting of the G20 leading economies this weekend.
 The currency mimicked moves in other markets, including
world stocks, which wavered on Friday as traders took profits
after this week's run-up. [MKTS/GLOB]
 The U.S. dollar ticked higher against major currencies on
uncertainty ahead of the gathering of finance ministers and
central bank chiefs in South Korea. [FRX/]
 The G20 is striving to put the world economy on a more
stable footing and defuse currency tensions that economists
fear could trigger trade wars. [ID:nTOE69L00U]
 "You've got the sense that the U.S. is basically out there
saying we're not going to do anything to devalue the dollar.
Those sort of issues have been providing some support for the
U.S. dollar," said David Watt, senior currency strategist at
RBC Capital Markets.
 "The bulk of the work for the G20 and the G20 communique is
not going to be finalized until the weekend so the markets are
prepared for, well, just in case there's an agreement, we don't
necessarily want to be caught short the dollar."
 But Watt added the market was cautious in general about
what's going to happen with currencies, given speculation the
Federal Reserve will announce more monetary easing next month,
likely through direct purchases of U.S. Treasury debt.
 The Canadian dollar CAD=D4 ended at C$1.0269 to the U.S.
dollar, or 97.38 U.S. cents, down a hair from Thursday's close
at C$1.0263 to the U.S. dollar, or 97.44 U.S. cents. It was
down 1.5 percent for the week.
 Earlier, the currency firmed to a session high of C$1.0224
to the U.S. dollar, or 97.81 U.S. cents, supported in part by
data showing Canadian retail sales in August beat expectations.
 [ID:nN22252766] [ID:nN22149720]
 "Retail sales were above expectations," said Camilla
Sutton, chief currency strategist at Scotia Capital.
 "There was a revision higher as well to the July numbers.
It's a bit stale coming from the summer, but still it's a
positive print for Canada as our data has been a bit uneven
lately, so this is a positive piece in terms of updating us on
where the consumer sits."
 Economists said Friday's September inflation data, which
was largely muted, was unlikely to strengthen the resolve of
those who think the Bank of Canada will begin to raise interest
rates soon.
 The central bank paused on rate increases earlier this
week, and said that it would have to consider any further rate
hikes carefully, given the patchy global recovery.
[ID:nN20223890]
 BONDS LITTLE CHANGED
 Canadian bond prices were mostly flat as the market
remained largely subdued ahead of November's Federal Open
Market Committee meeting, where the U.S. central bank could
announce further monetary stimulus. [US/]
 Reaction to the Canadian economic data and corporate
issuance throughout the day caused some gyrations across the
curve, but the prevailing theme remains the expectation the Fed
will engage in quantitative easing, said Ian Pollick, portfolio
strategist at TD Securities.
 "We did take some price action from the U.S., we were
overperforming, at the beginning part of the day. The data
didn't do too much to the curve," he said.
 "You really have a prevailing bias in the market and that's
about quantitative easing."
 The two-year bond CA2YT=RR was down 2 Canadian cents to
yield 1.401 percent, while the 30-year bond CA30YT=RR was up
15 Canadian cents to yield 3.439 percent.
 In new issuances, Royal Bank of Canada  (RY.TO: Quote) sold C$1.5
billion of medium-term notes on Friday, according to a term
sheet seen by Reuters. [CA-TNC]
 (Reporting by Jennifer Kwan; editing by Rob Wilson)