Wednesday August 20, 2008 - 22:16:21 GMT
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Reuters - www.reuters.com
Forex Market News - Canadian dollar ends flat on data, oil price
* Canadian dollar retreats on retail data, oil slide
* Bonds give back some of their recent gains
By John McCrank
TORONTO, Aug 20 (Reuters) - The Canadian dollar ended flat
against the U.S. dollar on Wednesday, taking a hit from June
retail sales data and a retreat by oil prices later in the
session, which gave traders an opportunity to take profits on
Bond prices ended lower as investors rejigged their books
after a week of steep gains.
The Canadian dollar closed at C$1.0612 to the U.S. dollar,
or 94.23 U.S. cents, just a tad down from C$1.0610 to the U.S.
dollar, or 94.25 U.S. cents, at Tuesday's close.
The currency spent the session in a fairly wide range of
C$1.0570 and C$1.0653.
"The bulk of the price action was after the retail sales
number got out of the way and on the oil prices side as oil
prices sold off," said Dustin Reid, senior foreign exchange
strategist at ABN-AMRO in Chicago.
"Since then I think there has been some consolidation and
profit-taking (in the U.S.-Canadian currency pair)."
The main Canadian news for forex markets was the report on
June retail sales, which came in above expectations on the
headline number. However, stripping out the price effects,
sales actually fell 0.4 percent in volume terms for the month.
That knocked the Canadian dollar to its low point of the
day, but it bounced back as oil prices rallied well above $116
a barrel, which gave the commodity-linked currency a boost.
That support was short-lived though, as a midmorning report
showed U.S. oil inventories surged in the prior week, knocking
the price of crude oil CLc1 back below $115 a barrel and
pushing the Canadian dollar back near its daily low.
At that point, traders saw an opportunity to take profits
on the U.S. dollar, said Reid.
The next big Canadian data release with the potential to
move the currency is the consumer price index for July on
The headline year-over-year figure is expected to show
inflation rose 3.4 percent in the month, with the core figure,
which strips out volatile energy and food prices, at 1.6
percent, according to the average forecast by analysts in a
"I think the market will look quite closely and there will
be a substantial response, whichever way it goes," said Eric
Lascelles, chief economics and rates specialist at TD
The market has been pricing in Bank of Canada interest rate
cuts by the end of the year as a response to rafts of recent
data showing a softening economy. A lower than expected
inflation reading would give the central bank more leeway to
cut rates to spur growth, without having to worry about stoking
BOND PRICES FALL
Domestic bond prices fell after the retail sales numbers
"Despite the fact that the data today was not especially
supportive of the selloff ... people are kind of rejigging
their books and perspectives," said Lascelles.
"The Canadian bond market had such a strong bid in it over
the last month that it got to levels people found to be
absolutely absurd and I wonder if we're just seeing an unwind
of that," he said.
The two-year bond fell 10 Canadian cents to C$101.64 to
yield 2.794 percent. The 10-year bond slid 17 Canadian cents to
C$105.48 to yield 3.579 percent.
The yield spread between the two-year and 10-year bond was
77.8 basis points, down from 83.1 at the previous close.
The 30-year bond lost 39 Canadian cents to C$116.26 for a
yield of 4.039 percent. In the United States, the 30-year
treasury yielded 4.451 percent.
The three-month when-issued T-bill yielded 2.52 percent, up
from 2.45 percent at the previous close.
Reuters journalists are subject to an Editorial Handbook which requires
fair presentation and disclosure of relevant interests
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