CANADA FX DEBT-C$ jumps a cent as US$ falls after data

Tue Apr 14, 2015 4:55pm EDT
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(Adds comment from Cambridge Mercantile Group, details, closing
    * Canadian dollar ends at C$1.2490, or 80.06 U.S. cents
    * Bond prices rise across the maturity curve

    By Solarina Ho
    TORONTO, April 14 (Reuters) - The Canadian dollar on Tuesday
rallied more than a cent against its U.S. counterpart as markets
positioned themselves ahead of a Bank of Canada interest rate
decision and as the greenback fell following a
lower-than-expected rise in U.S. retail sales.
    U.S. data showed that while retail sales rebounded 0.9
percent last month, their largest gain in a year, they still
came in below the 1 percent rise economists were forecasting.
    "We didn't get that (1 percent) ... so we saw a lot of
speculative positions bail out of their long U.S. dollar
positions," said Scott Smith, senior market analyst at Cambridge
Mercantile Group in Calgary.
    Following the data, the U.S. dollar fell broadly against a
basket of currencies. The currency is still expected to
continue its rally and Wednesday's declines were a good
opportunity for market participants to buy some U.S. dollar at
cheaper and more attractive levels. 
    But Smith said the magnitude of the retail sales miss did
not justify the size of the Canadian dollar's move and said the
markets were likely a little long U.S. dollar heading into the
rate announcement.
    The Canadian dollar finished at C$1.2490 to the
greenback, or 80.06 U.S. cents, stronger than the Bank of
Canada's official close on Monday of C$1.2592, or 79.42 U.S.
    The Bank of Canada will announce its April decision and give
its quarterly Monetary Policy Report on Wednesday. Markets are
pricing in a low probability of a rate cut. 
    While Smith is not expecting changes either, he added that
following January's completely unexpected 25-basis-point cut,
"you can't rule out anything."
    With the price of U.S. crude stabilizing between $45 and $55
a barrel, Smith believes the Bank will be comfortable with its
monetary policy for now. Oil is a major Canadian export.
    Higher oil prices also provided a boost for the loonie.
Prices climbed on indications U.S. oil production was falling
and on a weaker greenback. Tensions in Yemen, which some fear
could destabilize neighboring Saudi Arabia, also added to
analysts' worries. U.S. crude prices were up 3.20 percent
to $53.57 a barrel, while Brent crude added 1.74 percent
to $58.94. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 1 Canadian
cent to yield 0.511 percent and the benchmark 10-year
 rising 31 Canadian cents to yield 1.321 percent.
    The Canada-U.S. two-year bond spread was -0.5, while the
10-year spread was -58.1.

 (Reporting by Solarina Ho; Editing by Lisa Von Ahn and James