* Higher oil prices help cushion C$’s drop
* No Canadian economic data to inspire a currency move
* Bond prices flat right across curve
By Frank Pingue
TORONTO, Feb 24 (Reuters) - Canada’s dollar was slightly lower versus the greenback on Tuesday morning as expectations of a Bank of Canada interest rate cut left little room for optimism that fundamentals in Canada are better than elsewhere.
The latest drop in the Canadian dollar came on the heels of weak retail sales figures for December, released on Monday, that offered more evidence of a deepening recession in Canada and will likely pressure the Bank of Canada to cut its key interest rate by a half point on March 3 to 0.50 percent.
Still, some experts say Canada will record smaller budget deficits and current account deficits over the course of the year, compared with the rest of the world, which could bode well for the currency.
“It’s really symptomatic of what we’ve been seeing over the last little while, and that is that the markets are finding it hard to make much of a distinction between Canada and the U.S. at the moment,” said Shaun Osborne, chief currency strategist at TD Securities.
“There is still some value in the Canadian dollar because although the outlook here is not particularly bright, I still think it’s relatively brighter than elsewhere.”
At 9:30 a.m. (1430 GMT), the Canadian unit was at C$1.2520 to the U.S. dollar, or 79.87 U.S. cents, down from C$1.2513 to the U.S. dollar, or 79.92 U.S. cents, at Monday’s close.
Helping to cushion the currency’s drop was a rise in the price of oil, a key Canadian export whose price is often a major influence in the currency’s direction.
But with no Canadian economic data due until the end of the week, the currency’s direction will likely be dictated by moves in the U.S. dollar, which during the current global economic downturn is benefiting from its safe-haven status.
Investors have been shunning riskier assets on concerns that government stimulus actions won’t be enough offset the global recession, which ultimately leaves currencies like the Canadian dollar to fall even if Canada’s fundamentals are sounder than those elsewhere.
Canadian bond prices were narrowly mixed across the curve as the lack of domestic influences to spark a move left them at the mercy of the bigger U.S. Treasury market, which was also straddling the break-even level.
The next data due out in Canada will be Friday’s current account balance for the fourth quarter. The data is expected to show Canada had a current account deficit of C$4.85 billion.
The interest-rate sensitive two-year bond was down 2 Canadian cents at C$102.74 to yield 1.174 percent, while the 10-year bond rose 5 Canadian cents to C$111.50 to yield 2.829 percent.
The 30-year bond climbed 2 Canadian cents to C$125.30 to yield 3.571 percent. (Editing by Peter Galloway)