CANADA FX DEBT-C$ rises modestly, focus shifts to Friday's GDP

Thu Aug 28, 2014 4:33pm EDT
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* Canadian dollar at C$1.0847 or 92.19 U.S. cents
    * 10-year bond yield at lowest since May 2013

 (Adds details, quotes; updates prices)
    By Leah Schnurr
    TORONTO, Aug 28 (Reuters) - The Canadian dollar firmed
modestly on Thursday, eking out a gain for the third day in a
row on the back of technical momentum and investor
repositioning, and as the market looked ahead to key domestic
economic data at the end of the week.
    The loonie is up about 1 percent for the week so far, fueled
by a sharp rise in Wednesday's session and putting it on track
for its best week since late March.
    Analysts said there are a number of factors behind the
currency's recent strength, including fund flow speculation
stemming from Burger King's plans to buy Tim Hortons
, stop loss levels that were triggered, and investor
reallocation heading into the end of the month.
    Focus turned to Friday's gross domestic product report, with
Canadian economic growth forecasted to pick up to 2.7 percent in
the second quarter, bouncing back from a slowdown in the first
three months of the year. 
    Analysts say there is the potential for the figures to come
in higher than expected, which would support the loonie.
    Even so, the loonie's recent strength is not expected to
    "This is the dip that most U.S. dollar bulls have been
waiting for and, as such, we don't see this as the start of a
new trend of strength in the loonie," said Bipan Rai, director
of foreign exchange strategy at CIBC World Markets in Toronto. 
    "It's the other way around, really, we expect this move to
reverse as we head into September and markets begin looking
toward the Federal Reserve tightening again."
    The Canadian dollar ended the North American
session at C$1.0847 to the greenback, or 92.19 U.S. cents,
slightly stronger than Wednesday's close of C$1.0855, or 92.12
U.S. cents.
     The loonie came off its high for the session at C$1.0837
shortly after U.S. data showed economic growth was revised
higher for the second quarter, which supported the greenback.
    Earlier this week, the currency pairing tested and fell back
from resistance around C$1.10, which initially sparked the move
higher in the loonie.
    After the failure to break C$1.10, "a lot of people that
were long U.S. dollars have probably gotten out of their
positions," said Rahim Madhavji, president at in Toronto.
    Along with the fallout from the corporate takeover news,  
"that has brought things back to oscillating around C$1.09,
which is the level we see things at going forward," he said.
    Canadian government bond yields were lower across the board,
with the yield on the benchmark 10-year at its
lowest level since May of last year at 1.997 percent. The
two-year up half a Canadian cent in price to yield
1.101 percent.

 (Editing by Bernard Orr)