May 15, 2009 / 8:35 PM / 11 years ago

CANADA FX DEBT-C$ weighed down by lower oil, weak data

 * Lower oil prices add to recent drag on C$
 * Canada manufacturing data misses expectations
 * Bond prices little changed across curve
 (Updates to close)
 By Frank Pingue
 TORONTO, May 15 (Reuters) - The Canadian dollar tumbled to
its lowest level in over a week on Friday, thanks to a one-two
punch of lower oil prices and soft manufacturing data.
 The price of oil, a key Canadian export and often a major
influence on the currency, fell 3 percent on pessimism about
the outlook for global energy demand. [ID:nSIN460588]
 That pulled Canadian dollar as low as C$1.1807 to the U.S.
dollar, or 84.70 U.S. cents, well below the six-month high of
C$1.1476 to the U.S. dollar, or 87.14 U.S. cents, it reached
early in the week.
 "What you're seeing is a continuation of what's been going
on recently with people taking profits on decent positions that
had been happening," said John Curran, senior vice-president at
CanadianForex, a commercial foreign exchange firm.
 "We've come a long way in a short while and this is the
expected pullback."
 The latest slide in the currency began early in the session
after data showed an unexpected drop in the value of domestic
manufacturing shipments in March to a near 10-year low.
 And with North American equities selling off, many traders
were clearly not interested in moving into riskier currencies
like the Canadian dollar, which tends to follow the general
view on the state of the global economy.
 The currency closed at C$1.1791 to the U.S. dollar, or
84.81 U.S. cents, down from C$1.1710 to the U.S. dollar, or
85.40 U.S. cents, at Thursday's close.
 The Canadian dollar spent much of the last half of the
session in a tight range ahead of the Victoria Day holiday
 The currency finished the week down 2.5 percent, ending a
string of nine straight weekly gains. But just like the recent
climb, the latest selloff may have been a touch overdone and
could set the currency up for some near-term gains.
 "I would look for some Canadian dollar strength to resume
in the coming weeks if people are confident that the worst has
been seen," said Curran.
 Canadian bond prices ended flat, easing slightly on the
long end, and taking some direction from the U.S. Treasury
market where hopes for an economic recovery sapped demand for
government debt.
 But the moves were muted going into the long weekend and
ahead of the Canadian March consumer price index data due on
Wednesday and the March retail sales report on Friday.
 "Obviously, people were looking to square positions and not
take too many fliers in increasingly thinned out trading," said
Michael Gregory, senior economist at BMO Capital Markets.
 "But we'll take it up again next week. We've got CPI coming
out and retail sales for Canada, a very critical report given
the weakness we've seen on the U.S. side."
 Gregory said he expects the domestic retail sales report,
due out on May 22, will deliver some "okay numbers" and further
the view that the Bank of Canada is done with easing for the
time being.
 The benchmark two-year Canadian government bond ended up 1
Canadian cent at C$100.31 to yield 1.097 percent, while the
10-year bond fell 9 Canadian cents to C$105.53 to yield 3.105
 The 30-year bond slipped 5 Canadian cents to C$119.50 to
yield 3.856 percent.
 Canadian bonds outperformed their U.S. counterparts across
most of the curve. The 30-year bond yield was about 23 basis
points below the U.S. 30-year yield, compared with around 20
basis points below on Thursday.

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