CANADA FX DEBT-C$ slips on weaker oil, fears about growth

Wed Jun 23, 2010 8:07am EDT
 
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 * C$ down at 96.90 U.S. cents
 * Markets eye Canada retail sales data, U.S. Fed
 * Bonds flat across the curve
 By Jennifer Kwan
 TORONTO, June 23 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday, tugged lower by weak
oil prices and recent U.S. economic data that raised worries
about the pace of recovery.
 "If you look at the U.S. data as of late it looks to be
mixed, if not weaker than the market would like. That seems to
be the driving factor, that maybe economic growth is stalling,"
said Jon Gencher, director of foreign exchange sales at BMO
Capital Markets.
 "That certainly has the market trading on a very cautious
note," said Gencher. He noted data on Tuesday that showed a
drop in existing home sales follows a string of weaker than
expected U.S. economic data.
 At 7:44 a.m. (1144 GMT), the Canadian dollar was at
C$1.0320 to the U.S. dollar, or 96.90 U.S. cents, slightly
lower than Tuesday's finish at C$1.0291 to the U.S. dollar, or
97.17 U.S. cents.
 The currency was expected to track moves in equity markets
on Wednesday, and an announcement by the Federal Reserve later
in the day. The U.S. central bank is expected to restate its
intention to keep interest rates on hold near zero percent for
"an extended period" and perhaps offer a less upbeat outlook
for the economy. [ID:nN22150078]
 In Canada, the market will digest Canadian retail sales for
April. [ECONCA]
 Also weighing on the currency was weaker oil, which fell
below $78 a barrel after U.S. industry data showed a surprise
jump in crude and gasoline stocks, and investors looked to
government figures later in the day for confirmation. [O/R]
 The currency's move lower on Wednesday comes after the Bank
of Canada said the day before the currency's drag on the
Canadian recovery could be a key issue in future monetary
policy.
 Bank of Canada Deputy Governor Timothy Lane said the value
of the Canadian currency against the U.S. dollar would affect
the central bank's decision on interest rates on July 20 and
beyond. [ID:nTOR007606]  [ID:nN22144820]
 Lane's comments, coupled with earlier inflation data,
raised some doubt over what the central bank might do at the
July 20 rate announcement.  [ID:nN22110502]
 Canadian government bond prices were largely flat across
the curve. The two-year government bond CA2YT=RR slipped 2
Canadian cents to yield 1.703 percent, while the 10-year bond
CA10YT=RR sagged 18 Canadian cents to yield 3.280 percent.
 (Reporting by Jennifer Kwan; Editing by Padraic Cassidy)