CANADA FX DEBT-C$ ends lower on weakness in GDP data, shrs, oil

Mon Aug 31, 2009 4:53pm EDT
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 * C$ ends at C$1.0950, or 91.32 U.S. cents
 * Economy shrinks, but recovery in view
 * Bond prices end higher across curve
 By Frank Pingue
 TORONTO, Aug 31 (Reuters) - Canada's dollar fell versus the
U.S. currency on Monday given a mix of weaker equities, oil
prices and data that showed a slightly sharper-than-expected
second-quarter contraction in the domestic economy
 The currency tumbled to its lowest level since Aug. 19 in
the aftermath of data that showed Canada's economy shrank
overall in the second quarter to mark its sharpest nine-month
downturn in half a century. [ID:nN31431924]
 The drag from North American equities early in the session
also aided the currency's slide to the intraday low of C$1.1094
to the U.S. dollar, or 90.14 U.S. cents.
 Canada's dollar began the North American session down as a
slide in Chinese equities overnight and sharp drop in oil
prices combined to stoke risk aversion.
 "You would've thought given what went on with equity
markets and on the data front we'd see some (more) weakness in
the Canadian dollar," said George Davis, chief technical
strategist at RBC Capital Markets.
 "But I think we've seen equity markets try to stabilize a
little bit here and trade off their lows so I think that's kind
of helped keep the selloff in the Canadian dollar in check."
 The Canadian dollar recovered slightly to close at C$1.0950
to the U.S. dollar, or 91.32 U.S. cents, down from C$1.0919 to
the U.S. dollar, or 91.58 U.S. cents at Friday's close.
 The GDP numbers were not all bad as they showed the economy
grew 0.1 percent in June after 10 months of decline, confirming
the recession has bottomed out and possibly putting the economy
on track for solid third-quarter gains.
 It was the last piece of Canadian data until Friday's key
jobs report, which is expected to show the economy shed 10,000
jobs in August while the unemployment rate is pegged to rise to
8.7 percent.
 Another drag on the Canadian dollar was the price of oil
CLc1, a key Canadian export, which fell nearly 4 percent to
below $70 a barrel [ID:nSYD487149].
 Separately, Canadian Finance Minister Jim Flaherty, who
warned in early August that steps could be taken to curb a
sharp rise in the Canadian dollar, said in Vancouver on Sunday
he was pleased with the currency's recent stability.
 Canadian bond prices were stronger following the weak
domestic GDP data and slide in North American equity markets,
but the move was held in check ahead of Friday's jobs data and
as equities moved off their lows.
 The S&P/TSX composite index .GSPTSE ended down 1 percent
at 10,868.21, while the Dow Jones industrial average .DJI
slipped 0.5 percent.
 The two-year bond CA2YT=RR rose 3 Canadian cents to
C$99.45 to yield 1.282 percent, while the 10-year bond
CA10YT=RR rose 13 Canadian cents to C$102.05 to yield 3.379
 The 30-year bond CA30YT=RR edged up 20 Canadian cents at
C$118.60 to yield 3.897 percent.
 Canadian bonds mostly underperformed their U.S.
counterparts. The Canadian 10-year bond yield was 2.7 basis
points below its U.S. counterpart, compared with 5.4 basis
points on Friday.
 (Editing by Jeffrey Hodgson)