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CANADA FX DEBT-C$ dips, hurt by weak US data, bonds mixed

Published 08/13/2009, 05:11 PM
Updated 08/13/2009, 05:15 PM

* C$ ends a touch lower at 91.83 U.S. cents

* Contrasting European and U.S. data spur swings

* Bond prices mixed as stocks gain, supply absorbed

By Ka Yan Ng

TORONTO, Aug 13 (Reuters) - The Canadian dollar closed slightly lower against the greenback on Thursday after trading in a wide range on contrasting economic data from Europe and the United States.

The currency traded as high as C$1.0792, or 92.66 U.S. cents, rising with U.S. stock market futures after Wal-Mart Stores Inc reported second-quarter results that topped Wall Street's expectations. [ID:nN13324438]

But that gain was erased after some disappointing U.S. data offset the Wal-Mart news and pulled the Canadian dollar as low as C$1.0911, or 91.65 U.S. cents.

U.S. retail sales dipped an unexpected 0.1 percent in July. [ID:nN12109251] Data also showed the weak U.S. labor market struggled to stabilize with the latest jobless claims rising slightly last week. [ID:nN13489469]

"There's been some volatility but at the end of the day we've pretty much come back to fairly neutral levels on a net change from where we were yesterday," said George Davis, chief technical analyst at RBC Capital Markets.

"The retail sales numbers were weaker than expected. That poured some cold water on the (U.S.) equity market rally, which in turn pushed risk aversion levels higher," he added.

Lifting the Canadian dollar off its low were reports that showed the euro zone's two biggest economies, Germany and France, defied expectations with returns to growth in the second quarter. That pushed the U.S. dollar against lower [ID:nLD331672] a raft of currencies.

The Canadian dollar was one of the softest performers among major currencies against the U.S. dollar on Thursday. Its 0.1 percent fall paled in comparison to the more than 1 percent rise in its sister commodity currencies, the Australian and New Zealand dollars.

At session's end, the currency was at C$1.0890 to the U.S. dollar, or 91.83 U.S. cents, down slightly from C$1.0884 to the U.S. dollar, or 91.88 U.S. cents, at the close on Wednesday, when it snapped a four-day skid.

BOND PRICES MIXED

A surge in Canadian equities, stronger U.S. stocks, and the surprising economic growth data overseas contributed to slightly lower Canadian bond prices at the short end.

But longer-term maturities rose with their U.S. counterparts as investors snapped up a record $15 billion of 30-year U.S. government bonds in the third and final leg of the Treasury's $75 billion quarterly refunding. [ID:nN13543887]

The two-year Canadian bond was off 2 Canadian cents at C$99.33 to yield 1.334 percent, while the 10-year bond rose 8 Canadian cents to C$101.98 to yield 3.509 percent.

The 30-year bond gained 35 Canadian cents to C$117.05 to yield 3.980 percent. In the United States, the 30-year bond yielded 4.424 percent.

Canadian bonds underperformed their U.S. counterparts across most of the curve, except in the three-year maturity. The Canadian 30-year bond was about 44.4 basis points below the U.S. 30-year yield, versus 53.5 basis points on Wednesday. (Editing by Peter Galloway)

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