CANADA FX DEBT-C$ drops to 2-week low after soft data

Wed Jun 23, 2010 11:17am EDT
 
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   * C$ down at 95.83 U.S. cents
 * Bond prices jump after U.S. new home sales fall sharply
 * Canada retail sales fall more than expected 2.0 pct
 * Markets await U.S. Federal Reserve decision
 * Carney says watching Canadian dollar closely
 (Updates to midmorning)
 By Ka Yan Ng
 TORONTO, June 23 (Reuters) - The Canadian dollar tumbled to
a two-week low against the U.S. currency on Wednesday after a
pair of soft economic reports raised concerns about the pace of
the global economic recovery.
 Weak auto sales helped depress Canadian April retail sales,
which fell a sharper than expected 2 percent from March. That
put the month well behind the median forecast for a 0.4 percent
decline in retail sales, according to government data.
[ID:nN23196800]
 "This was quite a disappointing report. The broad-based
nature of it suggests that, during the month, Canadians more or
less sat on their hands," said Millan Mulraine, economics
strategist at TD Securities.
 He added the report was unlikely to prevent the Bank of
Canada from raising rates next month.
 At 10:55 a.m. (1455 GMT), the currency was at C$1.0435 to
the U.S. dollar, or 95.83 U.S. cents, down from C$1.0291 to the
U.S. dollar, or 97.17 U.S. cents, at Tuesday's close.
 The currency's decline was further pressured by data that
showed sales of new U.S. homes fell a record 32.7 percent in
May to the lowest level in at least four decades as the boost
from a popular tax credit faded.  [ID:nN23209668]
 The Canadian dollar hit its lowest point since June 9 at
C$1.0461 to the U.S. dollar, or 95.59 U.S. cents, following the
U.S. housing data, before paring losses.
 Jon Gencher, director of foreign exchange sales at BMO
Capital Markets, noted that recent economic data had put equity
markets on guard.
 "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
 "That certainly has the market trading on a very cautious
note," said Gencher.
 Additionally, the currency was tugged lower by weak oil
prices, which fell towards $76 a barrel, while equity markets
were mixed.
 Earlier, Bank of Canada Governor Mark Carney said the
central bank was watching the Canadian dollar as a factor in
monetary policy, echoing comments made by deputy governor
Timothy Lane on Tuesday. [ID:nN22144820]
 "It's one of the factors we have to take into consideration
every time we make a decision ... we're watching that closely,"
he told Reuters Insider.  [ID:nN23179479]
  "Absolute strength matters. Volatility matters a lot
though as well."
 Lane said on Tuesday that 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.
 BOND PRICES SOAR
 Canadian government bond prices were all in positive
territory after the morning's run of soft data.
 Market players were also awaiting an announcement by the
U.S. 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 for "an extended period" and perhaps offer a
less upbeat outlook for the economy. [ID:nN22150078]
 The two-year government bond CA2YT=RR was up 14 Canadian
cents to yield 1.621 percent, while the 10-year bond
CA10YT=RR gained 17 Canadian cents to yield 3.239 percent.
 (Reporting by Ka Yan Ng and Jennifer Kwan; editing by Rob
Wilson)