CANADA FX DEBT-C$ stuck lower after weak GDP data

Mon Aug 31, 2009 9:30am EDT
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 * C$ down at C$1.1071 to the U.S. dollar
 * Economy shrinks, but recovery in view
 * Bond prices mostly higher across curve
 By Frank Pingue
 TORONTO, Aug 31 (Reuters) - Canada's dollar was stuck lower
versus the U.S. currency on Monday given a mix of lower
equities, oil prices and data that showed a slightly sharper
than expected contraction in the domestic economy.
 According to the data, Canada's economy shrank at an annual
rate of 3.4 percent in the second quarter. But Canada also eked
out a 0.1 percent monthly gain in June compared with May, which
marks a tentative sign of economic recovery. [ID:nN31431924]
 The domestic currency bounced around immediately after the
data before eventually holding steady above its pre-data level.
But it remained lower for the session as the mix of a sharp
fall in Chinese equities and lower oil prices stoked risk
 "I think the currency continues to take direction from the
global markets over the very near term, and we saw some
disappointing market moves out of China and that's probably
going to carry the moves for the day," said Craig Wright, chief
economist at Royal Bank of Canada.
 At 9:20 a.m. (1320 GMT), the Canadian unit was at C$1.1071
to the U.S. dollar, or 90.33 U.S. cents, down from C$1.0919 to
the U.S. dollar, or 91.58 U.S. cents at Friday's close.
 But that was above its pre-data level of about C$1.1081 to
the U.S. dollar, or 90.24 U.S. cents.
 The quarterly and monthly Canadian GDP figures were below
expectations and together with a revised first-quarter figure,
showed the recession was deeper than many had believed.
 After the data, Canada's dollar tumbled as low as C$1.1090
to the U.S. dollar, or 90.17 U.S. cents and jumped as high as
C$1.1065 to the U.S. dollar, or 90.37 U.S. cents.
 Another drag on the Canadian dollar was the price of oil
CLc1, a key Canadian export, which fell more than two percent
to around $71 a barrel [ID:nSYD487149].
 Separately, Canadian Finance Minister Jim Flaherty, who
warned this month 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. [ID:nN30417133]
 Canadian bond prices were mostly higher across the curve as
a slide in global equities ramped up demand for more secure
assets like government debt.
 Global stocks were down as investors remained nervous about
whether the major economies can pull convincingly out of
recession. [ID:nLV105839]
 The two-year bond CA2YT=RR was up 2 Canadian cents at
C$99.44 to yield 1.285 percent, while the 10-year bond
CA10YT=RR rose 3 Canadian cents to C$102.95 to yield 3.391
 The 30-year bond CA30YT=RR was down 25 Canadian cents at
C$118.15 to yield 3.920 percent. The comparable U.S. bond
yielded 4.231 percent.
 (Additional reporting by Jennifer Kwan; Editing by Jeffrey