CANADA FX DEBT-C$ drifts lower despite oil rise, bonds mixed

Mon Jun 29, 2009 5:15pm EDT
 
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 * C$ covers narrow range, ends at 86.45 U.S. cents
 * Fails to benefit from 3 pct rise in oil prices
 * Bonds mixed in lackluster trade
 * Eye on Canadian GDP for April on Tuesday
 (Adds details)
 TORONTO, June 29 (Reuters) - The Canadian dollar drifted
lower against the U.S. dollar on Monday in a quiet rangebound
session, unable to benefit from a rally in oil prices.
 The currency moved in a narrow range between C$1.1509 and
C$1.1601, reflecting a lack of data and reduced trades in a
week that is punctuated by two market holidays.
 The Canadian dollar finished at C$1.1567 to the U.S.
dollar, or 86.45 U.S. cents, down from C$1.1542 to the U.S.
dollar, or 86.64 U.S. cents at Friday's close.
 Not even a 3 percent jump in oil prices to above $71 a
barrel, [ID:nN29393310] could spark activity in the currency.
Oil, a key Canadian export, often influences the direction of
the currency.
 "It's a little bit odd perhaps that we've seen such a big
pickup in oil prices and no reaction from the Canadian dollar,"
said Shaun Osborne, chief currency strategist at TD
Securities.
 Osborne said he expected oil to rise further, likely past
its 2009 high above $73 a barrel, which would then be hard for
the Canadian dollar to ignore.
 The currency may continue to stay rangebound until the
biggest data point of the week for the June U.S. non-farm
payrolls data. ECON
 Canadian GDP data, due on Tuesday, is expected to show a
ninth straight month of economic contraction with a 0.1 percent
fall in April after a 0.3 percent decline in March. TD sees a
0.1 percent rise on the month.
 "We're expecting something positive for the Canadian dollar
to come from the GDP numbers. I think even if we miss slightly
on the positive ... I think even unchanged will be quite a
result for the Canadian dollar, given the string of weak
numbers that we've had on the GDP front."
 At the moment, the Canadian dollar is looking a little bit
"stretched" after retreating most of this month after a making
a three-month run to nearly 93 U.S. cents, he added.
 "To my mind, it looks like a correction to the underlying
trend," Osborne said.
 BONDS LITTLE CHANGED
 Short-term bond prices were slightly lower as equity
markets moved higher, while longer-dated issues were up a
touch, but activity seemed to lack conviction.
 Trading was expected to be lackluster all this week due to
holidays on both sides of the border with Canada Day on
Wednesday and U.S. Independence Day observed on Friday.
 The benchmark two-year government bond slipped 1 Canadian
cent to C$100.09 to yield 1.202 percent, while the 10-year bond
rose 7 Canadian cents to C$103 to yield 3.391 percent.
 The 30-year bond was up 10 Canadian cents at C$118.80 to
yield 3.882 percent. The comparable U.S. issue yielded 4.287
percent.
 Canadian bonds underperformed U.S. treasuries across most
of the curve. The Canadian 30-year bond was 40.5 basis points
below the U.S. 30-year yield, little changed from 43.7 basis
points on Friday.
 (Reporting by Ka Yan Ng; editing by Rob Wilson)