January 29, 2010 / 10:11 PM / in 10 years

CANADA FX DEBT-C$ hits six-week low as greenback up on U.S. data

 * Ends at C$1.0693 to the US$, or 93.52 U.S. cents
 * C$ down 1 percent for the week
 * Canada GDP data shows economy picks up speed in November
 * Data shows U.S. economy grew faster than expected in Q4
 * Canadian bond prices underperform U.S. issues
 (Updates to close, adds quote)
 By Jennifer Kwan
 TORONTO, Jan 29 (Reuters) - The Canadian dollar touched its
lowest level in six weeks against the U.S. dollar on Friday,
pressured as the greenback rallied after data showed the U.S.
economy grew at a faster clip than expected.
 Data showed the U.S. economy grew at its quickest pace in
more than six years in the fourth quarter, reinforcing the view
the United States was recovering faster than other developed
countries. [FRX/]
 The Canadian dollar finished the North American session at
C$1.0693 to the U.S. dollar, or 93.52 U.S. cents, according to
the official Bank of Canada close. But shortly after it
weakened further to touch C$1.0706, or 93.41 U.S. cents, its
lowest level since Dec. 18.
 On Thursday, it finished at from C$1.0662 to the U.S.
dollar, or 93.79 U.S. cents.
 The Canadian dollar's move lower was also a symptom of a
broader trend of risk aversion, said Derek Holt, economist at
Scotia Capital.
 "What's dominating things is the safe haven bid away from
troubles in the peripheral European economies...," he said.
 "It's U.S. dollar and Treasury strength at the expense of
all the risk trades," Holt added.
 Earlier, the Canadian currency got a slight lift from
domestic data that showed Canada's economic recovery picked up
speed in November.
 Statistics Canada said gross domestic product advanced 0.4
percent in the month, beating market expectations for 0.2
percent growth, on strength in wholesale trade as well as oil
and gas extraction. [ID:nN29201456]
 "For one of the few times in the past two years, the
Canadian GDP numbers actually surprised on the high side," said
Doug Porter, deputy chief economist at BMO Capital Markets.
 "What was encouraging here is that it doesn't look like it
was any one particular sector. It was relatively well spread
out across a few of the goods producing industries."
 Oil prices, a key Canadian export, dropped below $73 a
barrel, while gold and base metals prices were also under
pressure. [O/R] [GOL/]
 The Canadian dollar dropped 1 percent for the week as the
greenback gained broadly on general risk aversion with
investors starting the week on cautious footing.
 Key events kept investors on edge, including the U.S.
Federal Reserve's interest rate announcement, the Senate vote
to back Fed Chairman Ben Bernanke for a second term, as well as
U.S. President Barack Obama's State of the Union address.
 Another factor overhanging the markets was the fiscal
health of Greece and other smaller euro zone countries, as well
as China's move to tighten credit.
 Government bond prices were mixed across the curve,
reflecting an unwinding of recent activity, said Kam Bath,
fixed-income strategist at RBC Capital Markets. [US/]
 "Bond yields are essentially unchanged in Canada. We've
underperformed the U.S. across the curve today. I think that's
more of function of recent Canadian outperformance," he said.
 The two-year bond CA2YT=RR ticked 1 Canadian cent higher
at C$100.36 to yield 1.323 percent, while the 30-year bond
CA30YT=RR slipped 35 Canadian cents to C$117.45 to yield
3.950 percent.
 Canadian bonds mostly underperformed U.S. Treasuries, with
the Canadian 2-year bond 53 basis points above the U.S. 2-year
yield, compared with about 48 basis points in the previous
 Elsewhere, Ontario on Friday sold $3 billion of five-year
global notes according to IFR, a Thomson Reuters service.
 (Editing by Jeffrey Hodgson)

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