CANADA FX DEBT-C$ notches 5th straight gain after retail data
* C$ hits highest against greenback since Aug. 6
* Canada retail sales top expectations
* Bond prices reclaim slice of recent skid
By Frank Pingue
TORONTO, Aug 24 (Reuters) - Canada's dollar rose against the U.S. dollar for the fifth straight session on Monday, touching its highest in more than two weeks, after retail sales topped expectations and raised optimism about the economy.
But most of the gains evaporated later in the session as a rally by North American equities faltered and U.S. Treasury bonds jumped, and investors moved into less risky assets.
The latest Canadian data showed retail sales rose 1 percent from May, fueling hope that the economy is pulling out of recession. [ID:nN24136179]
That helped to lift the Canadian currency to C$1.0727 to the U.S. dollar, or 93.22 U.S. cents, its highest since Aug. 6 and a 22 percent move off the four-year low reached in early March.
The rise petered out but the Canadian dollar still recorded a gain for the session, closing at C$1.0770 to the U.S. dollar, or 92.85 U.S. cents, up from C$1.0819 to the U.S. dollar, or 92.43 U.S. cents, at Friday's close.
"It's a little disappointing because the equities seemed to have lost their way a bit this afternoon and with that the Canadian dollar was dragged down," said Steve Butler, director of foreign exchange trading at Scotia Capital.
"It's not a bad result but I certainly think when you get below C$1.0740 early this morning and then close back up here today it's probably not a fantastic result for Canada bulls."
The rally in the Canadian dollar extends a recent run-up that has been supported by oil prices hitting a 2009 high and hopes that the global economy was on the mend.
Toronto's S&P/TSX composite index .GSPTSE closed down 41.21 points at 10,789.97. Earlier in the session it had rallied 72 points. [ID:nTOR004899]
BOND PRICES RALLY
Canadian bond prices ended up across the curve, largely tracking the move in the bigger U.S. Treasury market, as many investors did some bargain-hunting after recent losses.
The move higher allowed bond prices to rebound from late last week when dealers unloaded more secure government debt after U.S. Federal Reserve Chairman Ben Bernanke said prospects for a return to growth in the near term appeared good in the United States and elsewhere. [ID:nN2139655]
"It's a bit of bargain hunting from the selloff we had on Friday and it just manifested as the equity rally just petered out in North American," said Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment. "But overall liquidity is very thin out there so you are going to get really exaggerated price movement."
The two-year Canadian bond rose 9 Canadian cents to C$99.38 to yield 1.315 percent, while the 10-year bond rose 45 Canadian cents to C$102.60 to yield 3.434 percent.
The 30-year bond rallied 90 Canadian cents to C$118.30 to yield 3.913 percent.
Canadian bonds underperformed their U.S. counterparts across most of the curve. The Canadian 30-year bond was 35.1 basis points below the U.S. 30-year yield, versus 45.5 basis points on Friday.
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