February 22, 2011 / 2:57 PM / 9 years ago

CANADA FX DEBT-C$ steady after weak retail sales, oil supports

 * C$ steady at $1.0142
 * Bonds firm across curve on Libya revolt
 * Canada Dec retail sales down, first in 7 months
 (Adds details)
 By Ka Yan Ng
 TORONTO, Feb 22 (Reuters) - Canada's dollar was little
changed against the U.S. greenback on Tuesday after
unexpectedly weak domestic retail sales data, with a
Libya-inspired surge in the price of oil providing support.
 Canadian retail sales fell 0.2 percent in December, but
November's strong growth was revised up by the same amount,
Statistics Canada said. [ID:nN22272852]
 The report, the only major domestic release for the week,
is one of the last key pieces of data ahead of the Bank of
Canada's March 1 policy-setting decision.
 "It was a little bit weaker than expected but the market
has got bigger fish to fry," said Doug Porter, deputy chief
economist at BMO Capital Markets.
 "On balance, the retail sales were a tad disappointing,
especially on the headline. Ex-autos, it wasn't very much of a
surprise and we did get a small upward revision to the prior
 Excluding auto sales, which were down 2.8 percent from
November, retail sales rose by 0.6 percent, as expected. A
Reuters survey of analysts had predicted no change for overall
retail sales. ECONCA
 Riskier assets backpedaled on Tuesday as Libyan leader
Muammar Gaddafi signaled defiance of a mounting revolt against
his 41-year rule on Tuesday, appearing on state television and
denying he had fled the country. [ID:nLDE71L1CD]
 The turmoil in Libya drove oil prices to 2-1/2 year highs,
prompting fears of disruption to global economic growth. The
focus on Libya also put pressure on world stocks and lifted
government bond prices. [MKTS/GLOB]
 But soaring oil -- U.S. crude was up about 7 percent -- was
supportive to Canada's currency, keeping it locked in recent
ranges after reaching as high as C$0.9823 to the U.S. dollar,
or $1.0180, overnight.
 "You would expect the Canadian dollar to be softening but
because of Canada's large net exports of oil, the dollar is
hanging in there," said Porter.
 At 9:25 a.m. (1425 GMT), the currency CAD=D4 was at
C$0.9860 to the U.S. dollar, or $1.0142, exactly the same as
Friday's North American session close. Most Canadian financial
markets were closed on Monday.
 Canadian government bonds were firmer across the curve in a
flight to safer assets as risk sentiment took a hit from the
disruption in Libya.
 The weaker-than-expected retail sales data also helped,
suggesting there is little pressure on the Bank of Canada to
quickly resume its rate-hike campaign.
 None of the 12 primary dealers surveyed by Reuters last
week expect the Bank of Canada to hike rates in March, with
most still calling for an interest rate increase in the first
half of the year. May was seen as the most likely month for the
next central bank tightening. [CA/POLL]
 Canada's unexpected trade surplus in December after nine
months of deficits was one of the factors contributing to a
more upbeat outlook on the economy. However, the retail sales
data suggested the outlook is more mixed.
 Bank of Canada Governor Mark Carney suggested on the
weekend the central bank's projection in January of 2.3 percent
annualized growth in the fourth quarter could be tweaked higher
after growth came in at a disappointing 1 percent in the third
quarter. [ID:nN19302110]
 The two-year Canadian government bond CA2YT=RR rose 8
Canadian cents to yield 1.850 percent, while the 10-year bond
CA10YT=RR advanced 46 Canadian cents to yield 3.412 percent.
 (Editing by Jeffrey Hodgson)

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