* C$ drops as low as $1.0251, lowest point since March 2
* Bond prices rise on safe-haven demand
* Canada trade surplus C$116 mln, much less than forecast
* Oil futures fall, U.S. dollar gains on euro zone worries
TORONTO, March 10 (Reuters) - Canada's dollar fell to a
one-week low against the greenback on Thursday morning as oil
prices dropped and data showed the country's trade surplus
narrowed more than expected in January.
The Canadian dollar
dropped as low as C$0.9755 to
the U.S. dollar, or $1.0251, as Canada's trade surplus fell to
C$116 million in January from a downwardly revised C$1.7
billion surplus in December. Analysts surveyed by Reuters had,
on average, forecast a trade surplus of C$2.6 billion.
"The trade numbers were a great deal worse than expected.
Our economic data is still sort of mixed. I would think that
not many people are expecting a midyear (interest) rate hike
anymore," said John Curran, senior vice president at
"We bottomed out yesterday near trend-line support, and
with numbers like that, sure, it's time to rethink your
Canadian dollar positioning for the medium term."
At 9:45 a.m. (1445 GMT), the Canadian dollar was at
C$0.9753 to the U.S. dollar, or $1.0253, down from Wednesday's
close of C$0.9687 to the U.S. dollar, or $1.0323.
The trade figures firmed up market expectations that the
Bank of Canada will stand pat on interest rates on its April 12
policy-setting date. Based on overnight index swaps, markets
are pricing in a 91.26 percent probability of no change in
rates, up from 90.60 percent just ahead of the trade data,
according to a Reuters calculation.
The market is not fully pricing in a hike until the central
bank's September policy-setting date.
Analysts said the details of the trade report were stronger
than the disappointing headline.
"The trade balance stayed in surplus - just barely - for
the second straight month after nine months in deficit," said
Jonathan Basile, economist at Credit Suisse, noting that
exports and imports are "starting Q1 on a very strong note...
indicative of strong global and Canadian domestic activity."
Other factors hurting the Canadian dollar on Thursday
included a slide in U.S. crude oil prices and safe-haven buying
of the U.S. dollar. That safe-haven move was in line with stock
market declines spurred by a Moody's downgrade of Spanish debt,
which reignited worries over the euro zone debt crisis.
The risk-off sentiment sent Canadian government bond prices
higher across the curve.
The two-year bond
was up 2 Canadian cents to
yield 1.872 percent, while the 10-year bond rose 6
Canadian cents to yield 3.392 percent.
(Reporting by Ka Yan Ng, Editing by Chizu Nomiyama and Peter