By Frank Pingue
TORONTO, Aug 3 (Reuters) - The Canadian dollar was hobbled
by a drop in oil prices and a weaker than expected piece of
data on Friday, which left the currency a touch lower despite a
much softer greenback.
Domestic bond prices finished higher, taking their cue from
a rise in U.S. treasuries after weak data south of the border
sparked demand in the safety of government bonds.
The Canadian dollar closed at C$1.0545 to the U.S. dollar,
or 94.83 U.S. cents, down from C$1.0534 to the U.S. dollar, or
94.93 U.S. cents, at Thursday's close.
Trading volumes were thin and the currency's slim move was
exaggerated heading into a long weekend in most of Canada as
financial markets are closed on Monday for a public holiday. It
traded in a rather wide range of C$1.0500 to C$1.0572.
Economic data early in the session that showed a slight
decline in Canadian building permits had little impact given
that it followed a record gain in the prior month.
But Ivey Purchasing Managers Index data that showed the
pace of Canadian purchasing activity slowed in July, together
with a sharp drop in oil prices, stung the Canadian dollar and
left it unable to take advantage of a drop in the U.S dollar.
"The U.S. dollar sold off across the board but much less so
versus the Canadian dollar due to the sharp decline in oil
prices, which is obviously Canadian dollar negative," said
David Powell, currency analyst at IDEAglobal in New York.
"And also the weaker than expected Canadian data in the
form of Ivey left traders who were looking to selling the
(U.S.) dollar doing so against other currencies."
The greenback was beaten down against a basket of major
currencies after weak U.S. jobs data renewed concerns about
BONDS GET BOOST
Domestic bond prices shrugged off the slight decline in
building permits data, which showed little sign of slowing in
June, and opted to follow the jump in U.S. treasuries.
The bigger U.S. treasuries market, which often dictates
direction for the smaller Canadian market, rallied around the
surprisingly soft jobs and services data and subprime fears.
"Two rather important numbers out of the U.S. and they were
both extremely weak, and it really surprised the market," said
Eric Lascelles, a strategist at TD Securities.
"It was a profound movement in the U.S. markets and Canada
has just caught a case of the sniffles as well because of our
The two-year bond rose 5 Canadian cents to C$98.51 to yield
4.613 percent, while the 10-year bond gained 24 Canadian cents
to 96.31 to yield 4.468 percent.
The yield spread between the two-year and 10-year bond was
at -14.5 basis points against -13.7 at the previous close.
The 30-year bond rose 53 Canadian cents to C$110.56 to
yield 4.363 percent. In the United States, the 30-year treasury
yielded 4.862 percent.
The three-month when-issued T-bill yielded 4.60 percent, up
from 4.59 percent at the previous close.