October 18, 2012 / 12:37 PM / in 5 years

Canada dollar flat as rate view overshadows China data

TORONTO (Reuters) - The Canadian dollar was little changed near a one-week high against its U.S. counterpart on Thursday, buoyed by signs China’s economy may be pulling out of a slowdown but with gains kept in check by shifting views on the Bank of Canada’s rates stance.

At 8:11 a.m. (1211 GMT) the Canadian dollar was trading at C$0.9790 to the greenback, or $1.0215, compared with C$0.9780, or $1.0225, at Wednesday’s North American close.

China likely hit the bottom of a seven-quarter long economic downturn between July and September, but the slowest three months of growth since the depths of the financial crisis and a cloudy housing market outlook make recovery prospects tepid.

Resource-linked currencies such as the Canadian dollar typically react most forcefully to data from China, one of the world’s hungriest consumers of many commodities.

But gains were capped, with the Bank of Canada due to make a decision on interest rates next Tuesday, and after the bank’s governor failed to mention an intention to hike rates in a speech this week.

“The Aussie seems to generally have more of a reaction to the Chinese data,” said Matt Perrier, director of foreign exchange sales at BMO Capital Markets. “The fact that we’ve got the Canada rate announcement on Tuesday will keep the Canadian dollar at bay until then,” he said.

The Australian dollar hit a 2 1/2 week high versus the U.S. dollar, while it has appreciated to near C$1.02 against the Canadian currency this week after trading below parity earlier in October.

The Canadian currency strengthened against the euro, British pound, and Swiss franc.

Canadian government bond prices moved higher, with the two-year bond up 1 Canadian cent to yield 1.128 percent, while the benchmark 10-year bond added 8 Canadian cents to yield 1.903 percent.

Reporting by Alastair Sharp; Editing by Chizu Nomiyama

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