February 14, 2011 / 10:01 PM / 9 years ago

CANADA FX DEBT-Canadian dollar constrained in tight range

 * C$ closes down at $1.0116
 * Bond prices underperform U.S. Treasuries
 (Updates to close, adds details, quotes)
 By Claire Sibonney
 TORONTO, Feb 14 (Reuters) - The Canadian dollar slipped
from its highest level in more than a week against the U.S.
currency on Monday, but stayed trapped in a tight range as
investors awaited new signals on direction.
 It rose as high as C$0.9848 to the U.S. dollar, or $1.0154,
early in the day, its highest level since Feb. 4. but recoiled
quickly. Without any economic news to signal a path, the
currency was constrained in a narrow 54-basis-point range.
 The euro's fall on Monday weakened market sentiment and the
other usual drivers of the currency, oil futures and U.S.
equities, were soft and did little to inspire Canadian dollar
buying. [O/R] [.N]
 "I don't think there's anything right now in the market to
move the Canadian dollar either way," said Francois Barriere,
vice president of international markets at Laurentian Bank of
Canada in Montreal.
 "It's difficult because it doesn't seem to follow any
regular pattern whether it's correlated to oil, or gold, or
stock markets ... like the recent past, or the events happening
in the Middle East."
 Barriere said the Canadian dollar will eventually move more
on its own fundamentals than on global macro factors.
 "It will probably start to move on its own data, and its
own data as far as I'm concerned are not that strong ... except
for employment, which is pretty decent in Canada."
 The next significant economic figures are U.S. inflation
figures on Thursday, and the Canadian January inflation report
on Friday.
 But Barriere said the inflation numbers are unlikely to
dramatically raise concerns about unexpected Bank of Canada or
U.S. Federal Reserve interest-rate moves.
 The Canadian dollar CAD=D4 closed at C$0.9885 to the U.S.
dollar, or $1.0116, slightly down from Friday's North American
session close at C$0.9868 to the U.S. dollar, or $1.0134.
 Michael O'Neill, managing director at  Knightsbridge
Foreign Exchange, said the technicals on the Canadian dollar
were still bullish, noting another test of C$0.9850 area was
possible. If that is broken, he said he was eyeing C$0.9830,
which is two ticks firmer than the 2011 high. He put U.S.
dollar resistance at C$0.9890.
 Canadian government bonds were weaker across the curve, and
underperformed U.S. Treasuries although benchmark U.S. yields
remained just under record highs. [US/]
 The two-year Canadian government bond CA2YT=RR was off 7
Canadian cents to yield 1.939 percent, while the 10-year bond
CA10YT=RR fell 12 Canadian cents to yield 3.487 percent.
 (Additional reporting by Ka Yan Ng; editing by Peter Galloway)

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