March 21, 2012 / 9:13 PM / 6 years ago

Canada dollar struggles in indecisive trade

Canadian currency in the form of twenty dollar bills are displayed in this posed photograph in Toronto, October 22, 2008. REUTERS/Mark Blinch

TORONTO (Reuters) - Canada’s growth-related currency was little changed against the U.S. dollar on Wednesday, lacking direction from flat U.S. equities and mixed data signals.

U.S. stocks - a barometer of risk appetite for currencies - failed to rise above recent highs and ended the day lower, hampered by losses in risk-associated sectors like energy and financials. .N

U.S. data did little to boost sentiment as home sales fell in February, but upward revisions to the prior month’s pace and the first yearly increase in prices in 15 months suggested the housing market recovery remained on track.

“The data signals themselves have not provided an impetus for price action that would see the U.S. dollar break out of its range against many of the majors, including Canada,” said Jack Spitz, managing director of foreign exchange at National Bank Financial.

“The market is reacting to the lack of influences coming from the typical drivers.”

The currency gave back early gains from an overnight bounce after Greece rubber-stamped a second 130 billion euro ($172.15 billion) rescue, previously approved by the International Monetary Fund and Greece’s euro zone partners, to keep the debt-choked country afloat through 2014.

The news helped the Canadian dollar rebound after worries about a slowdown in demand from top metals consumer China pushed the currency to a near two-week low on Tuesday.

The Canadian dollar ended the North American session at C$0.9923 versus the U.S. dollar, or $1.0078, slightly weaker than Tuesday’s North American session close at C$0.9918 versus the U.S. dollar, or $1.0083.

Investors will look to manufacturing data in Europe on Thursday. They remain wary of another flare-up in the euro-zone debt crisis, with the Italian government set to clash with unions over employment law reforms.

Canadian retail sales for February and weekly U.S. jobless claims are also in focus for the next trading day.

“As we saw yesterday, there was fairly significant overhead (U.S. dollar) resistance on the break of C$0.9940,” added Spitz, noting that the market bias still appears to be Canadian-dollar positive.

“It attracted a lot of fresh players into the market to sell dollar/Canada as it had traded and trended toward the convergence of the 50- and 200-day moving averages, which is just below par at C$0.9990.”

The slow grind upward of the economy in the United States - Canada’s largest trading partner - has helped the Canadian dollar outperform most major currencies in recent weeks, including its commodity cousins, the Australian and New Zealand dollars.

Canadian bond prices were higher across the curve. The two-year bond was up 3 Canadian cents to yield 1.281 percent. The 10-year bond added 37 Canadian cents to yield 2.240 percent.

At the long end of the curve, the Bank of Canada’s C$1.4 billion auction of 30-year bonds was also met with healthy appetite, producing an average yield of 2.793 percent.

This compares with a much higher average yield on 30-year benchmark U.S. Treasuries, which hit an intraday peak of 3.47 percent.

The more-than-60-basis-point spread between U.S. and Canadian 30-year bonds is at the widest since August, noted Adam Button, currency analyst at ForexLive in Montreal, noting that the 10-years trade generally in tandem.

“The difference reflects questions about U.S. long-term debt sustainability and inflation,” he said.

Reporting by Claire Sibonney; Editing by Dan Grebler

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