Monday July 23, 2007 - 21:14:04 GMT
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Forex News - Canadian dollar hangs on for slim gain, bonds drop
Canadian dollar hangs on for slim gain, bonds drop
Mon Jul 23, 2007 4:57PM EDT
By Frank Pingue
TORONTO, July 23 (Reuters) - The Canadian dollar hung on
for a slim gain versus the U.S. currency on Monday despite a
sharp turn lower after it failed to find its footing above a
Bond prices were knocked lower ahead of Canada's May retail
sales report due on Tuesday, which is expected to show growth
in sales from April.
The Canadian dollar closed at C$1.0470 to the U.S. dollar,
or 95.51 U.S. cents, up from C$1.0485 to the U.S. dollar, or
95.37 U.S. cents, at Friday's session close.
Despite the rise, the Canadian currency ended well off its
session high of C$1.0426, or 95.91 U.S. cents, as it failed to
garner much interest around the C$1.0430 mark despite several
attempts at piercing that key level.
"It basically tested it three times. Twice it broke below
that briefly, but once it was clear it couldn't break much
lower than that we saw it retrace," said Matthew Strauss,
senior currency strategist at RBC Capital Markets.
"But now for the remainder of the afternoon and overnight I
expect a very tight trading range in dollar Canada ahead of the
Strauss said if the retail sales data come in comfortably
ahead of expectations, they could help the Canadian dollar
re-test the session high reached early in the day.
The Canadian dollar was unable to find any solace in oil
prices as London Brent crude dropped below $77 a barrel. The
currency often is influenced by moves in oil prices given
Canada's role as a major oil producer and exporter.
Canadian Finance Minister Jim Flaherty said on Monday the
government is paying attention to the currency's rapid climb,
but that it has no plan to intervene to slow the gain.
Flaherty downplayed the Canadian currency's rise against
the greenback in an interview with Business News Network and
said other major global currencies had enjoyed a similar
dramatic rise against the U.S. dollar.
Last week, the Canadian dollar, which is up more than 10
percent versus the greenback this year, reached a 30-year high
of C$1.0400, or 96.15 U.S. cents.
BONDS DIP AHEAD OF DATA
Canadian bond prices finished flat to lower ahead of the
retail sales data, which will be the key economic figures to be
released this week.
The report is expected to show retail sales climbed 0.5
percent in May from April, and 0.6 percent excluding the auto
sector, according to a Reuters poll.
"We are expecting fairly firm retail sales for Canada
tomorrow and ... the U.S. GDP report on Friday should also be
reasonably constructive," said Mark Chandler, fixed income
strategist at RBC Capital Markets.
The two-year bond was unchanged at C$98.42 to yield 4.648
percent, while the 10-year bond fell 5 Canadian cents to
C$95.92 to yield 4.565 percent.
The yield spread between the two-year and 10-year bond
moved to -8.3 basis points from -5.5 at the previous close.
The 30-year bond dropped 14 Canadian cents to C$108.69 to
yield 4.469 percent. In the United States, the 30-year treasury
yielded 5.064 percent.
The three-month when-issued T-bill yielded 4.54 percent, up
from 4.53 percent at the previous close.
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