August 13, 2010 / 12:23 PM / in 10 years

CANADA FX DEBT-C$ rises on German GDP, braces for U.S. data

 *C$ higher at 96.01 U.S. cents
 *Bond prices up across curve
 By Claire Sibonney
 TORONTO, Aug 13 (Reuters) - The Canadian dollar climbed
against its U.S. counterpart on Friday as global risk appetite
improved overnight on stellar German growth data, but concerns
about weaker economies in the euro zone and worries over a
downside surprise for U.S. inflation figures limited gains.
 The euro initially rallied in relief when data showed
Germany's economy grew much more than expected in the second
quarter, and the Canadian dollar CAD=D4 followed suit,
strengthening to as much as C$1.0358 against the greenback, or
96.54 U.S. cents.
 But the euphoria soon fizzled out, weighing on riskier
assets and currencies, and the Canadian dollar lost steam,
turning to trade near flat against Thursday's close.
 "I think a lot of the movement in the Canadian dollar has
come on the back of the movement in the euro," said Camilla
Sutton, senior currency strategist at Scotia Capital.
 "Initially we had very strong European growth numbers but
then the combination of a weak Italian bond auction, some focus
on internal disputes among EU members, as well as the overhang
from the Irish banks from earlier this week have all kind of
pressured the euro back down ... I think that's weighed on the
Canadian dollar."
 Investors were closely eyeing crucial U.S. data on July
inflation and retail sales, due at 8:30 a.m. (1230 GMT), for
the first readings of consumer spending in the third quarter.
 "The inflation print will probably be more important if
it's a downside surprise because it will aggravate fears over
disinflation or even deflation," said Sutton.
 "Retail sales will give us another input in terms of how
the U.S. consumer is faring so that will be important for the
general growth outlook."
  An August consumer sentiment survey by Thomson
Reuters/University of Michigan is also due.
 At 7:54 a.m. (1154 GMT), the Canadian dollar CAD=D4 stood
at C$1.0416 to the U.S. dollar, or 96.01 U.S. cents, up
slightly from Thursday's finish at C$1.0428 to the U.S. dollar,
or 95.90 U.S. cents.
 Sutton expected the day's trading range to be between
C$1.0350 and C$1.0486. "I suspect we're probably positioning
for a weaker Canadian dollar day," she added.
 Canadian bond prices were higher across the curve, tracking
U.S. Treasuries up, with investors favoring safe-haven
government debt ahead of the U.S. inflation data that is likely
to confirm the economic recovery is losing steam.
 The two-year bond CA2YT=RR inched up 1 Canadian cent to
yield 1.354 percent, while the 10-year bond CA10YT=RR gained
15 Canadian cents to yield 2.995 percent.
  (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)

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