CANADA FX DEBT-C$ retreats on weak July retail sales
* Canadian dollar at C$1.1069, or 90.34 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, Sept 23 (Reuters) - The Canadian dollar weakened against the greenback on Tuesday, reversing overnight gains after data showed retail sales unexpectedly declined in July. The currency had strengthened overnight after the HSBC/Markit Flash China Purchasing Managers' Index (PMI) showed the manufacturing sector in China, one of the world's biggest resource consumers, had picked up momentum this month. After six months of gains, Canadian retail sales fell 0.1 percent in July from June's record level, with strong auto sales failing to offset weakness in areas such as clothing and merchandise. The median forecast in a Reuters survey of analysts was for a 0.5 percent increase overall. "All the air got taken out of Canadian dollar's balloon when the retail sales number printed earlier this morning for the month of July. It really missed the Street's expectations," said Brad Schruder, director, foreign exchange sales, at BMO Capital Markets. Schruder noted, however, that the currency did not weaken through the C$1.11, or 90.10 U.S. cent, level, and said that its failure to do so could provide some support. "There had been pressure on the CAD to weaken, at least for a couple of weeks," he said. "This is supportive, but we've also seen enough data that has been supportive of the view that Canada should appreciate." Retail sales was the last major data point before gross domestic product figures for July are released next Tuesday. The Canadian dollar finished Tuesday's session at C$1.1069 to the U.S. dollar, or 90.34 U.S. cents, weaker than Monday's close of C$1.1031, or 90.65 U.S. cents, and well off the C$1.0986, or 91.02 U.S. cents, it touched earlier in the session. Except for its commodity counterparts, the Canadian dollar weakened against other major currencies. "In general, the U.S. dollar wants to continue to strengthen," said David Bradley, director of foreign exchange trading at Scotiabank. "That trend is firmly in place, but obviously when data or events come in, it might cause a slight reversal. You're going to see some profit-taking or some stop-losses go through." Bradley added that geopolitical factors overnight also affected the market, including the United States and its Arab allies bombing Syria for the first time on Tuesday. Canadian government bond prices were higher across the maturity curve, with the two-year up 6.7 Canadian cents to yield 1.122 percent and the benchmark 10-year adding 49 Canadian cents to yield 2.171 percent. (Editing by Jeffrey Benkoe; and Peter Galloway)
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