CANADA FX DEBT-C$ retreats from 7-mth high, bonds mixed

Mon May 25, 2009 9:51am EDT
 
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 * Canadian dollar backs off seven-month high
 * Bonds mixed, few influences
 * Market liquidity thin due to holidays in UK, U.S.
 TORONTO, May 25 (Reuters) - The Canadian dollar was weaker
against the U.S. currency on Monday, retreating after making a
four-day climb to its firmest level in seven months.
 Part of the currency's surge last week was attributed to
market worries about the AAA credit ratings of the United
States, while domestic inflation data was seen making it less
likely that the Bank of Canada will resort to unconventional
measures, such as quantitative easing, to stimulate the
economy.
 At 9:35 a.m. (1335 GMT), the Canadian dollar was at
C$1.1258 to the U.S. dollar, or 88.83 U.S. cents, down from
C$1.1203 to the U.S. dollar, or 89.26 U.S. cents, at Friday's
close.
 "The Canadian dollar has backed off a little bit, largely
on profit taking after last week's 5 percent advance against
the greenback," said Sal Guatieri, senior economist at BMO
Capital Markets.
 Commodity prices are expected to be a main influence with a
lack of domestic economic data available. Trading conditions
were expected to be muted with U.S. and British financial
markets closed for holidays.
 Market players will have to wait until the end of the week
for any Canadian data, with the current account balance for the
first quarter on tap. But the first quarter GDP figures next
Monday will likely be more critical to help investors gauge the
pace of the economy's recovery.
 Canadian Finance Minister Jim Flaherty said on Monday that
the country's economy was showing some "good signs", but was
still in recession.
 Recent Canadian data has shown encouraging evidence of
recovery, most recently with Friday's retail sales report, and
has helped light a fire under the domestic currency.
 However, U.S. data this week may prove to be the driver
with a raft of housing data due, including resales and new home
sales statistics, with the focus on whether the U.S. housing
market is stabilizing, said Guatieri.
 Meanwhile, Canadian bonds were mixed, without strong
impetus to push in either direction with U.S. Treasuries not
trading during Memorial Day.
 The benchmark two-year government bond dipped 1 Canadian
cent to C$100.19 to yield 1.154 percent, while the 10-year bond
rose 8 Canadian cents to C$104.16 to yield 3.26 percent.
 The 30-year bond gained 25 Canadian cents to C$117.35 to
yield 3.969 percent.
 (Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)