CANADA FX DEBT-C$ weaker after Canada GDP shrinks

Fri May 29, 2015 9:43am EDT
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* Canadian dollar at C$1.2519, or 79.88 U.S. cents

* Bond prices higher across the maturity curve

By Alastair Sharp

TORONTO, May 29 (Reuters) - The Canadian dollar weakened on Friday after data showed the country's economy contracted in the first quarter as business investment and exports fell.

With the data likely to bolster the view that Canada's central bank will hold rates steady until well after its U.S. counterpart has begun a raising cycle, momentum is not on the side of the loonie, as Canada's currency is colloquially known.

"It's much more likely to weaken from here than strengthen," said CIBC World Markets Chief Economist Avery Shenfeld. "The (U.S. Federal Reserve) is still talking about a rate hike this year, and that's nowhere in sight for the Bank of Canada.

Canada's first-quarter performance was the nation's worst since the second quarter of 2009, while the U.S. economy also contracted.

* At 9:16 a.m. ET (1316 GMT), the Canadian dollar was trading at C$1.2519 to the greenback, or 79.88 U.S. cents, its weakest level of the session and much weaker than Thursday's close of C$1.2435, or 80.42 U.S. cents.

* The currency's strongest level of the session was C$1.2411.   Continued...