CANADA FX DEBT-C$ weakens after wholesale trade data disappoints

Reuters

* Canadian dollar at C$1.1019 or 90.75 U.S. cents * Wholesale trade down 1.4 pct in December * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, Feb 19 (Reuters) - The Canadian dollar weakened against the greenback on Wednesday, hurt by data that showed domestic wholesale trade dropped more than expected in December to hit its lowest level in six months.

The 1.4 percent drop in wholesale trade from November was the latest in a series of negative economic figures for December, though some economists have blamed bad winter weather for the disappointing data.

"It was a pretty poor number, all things considered," said Greg Moore, senior currency strategist at Royal Bank of Canada in Toronto.

"It does take the tracking lower for how the Canadian economy ended 2013. That's why we've seen a pretty massive move lower in reaction to that for the Canadian dollar." The drop in the currency was the steepest since late January and interrupted its recent run higher. The loonie has gained 1 percent against its U.S. counterpart since the start of February, rebounding from 4-1/2 year lows hit at the end of January.

The Canadian dollar was sitting at a session low of C$1.1019 to the greenback, or 90.75 U.S. cents, on Wednesday, weaker than Tuesday's close of C$1.0951, or 91.32 U.S. cents.

Overnight, the currency had risen as high as C$1.0911, its highest level in just over a month.

Even with the weak wholesale trade data, investors expect the biggest risk for the loonie will come from January inflation data at the end of the week.

The Bank of Canada has noted its concern about the weak inflation environment and the numbers will be watched for any impact they might have on monetary policy.

"The Bank of Canada has been a very important driver of the Canadian dollar over the past six months, particularly given their gradual softening of their message and one that focuses more intently on the inflation numbers," Moore said.

"With that in mind, this Friday's CPI number will be a bit of a shaping moment for how forecasters consider the Bank of Canada meeting at the beginning of March." Investors will also assess the potential path of central bank policy south of the border with Wednesday afternoon's release of the minutes from the U.S. Federal Reserve's most recent meeting.

Canadian government bond prices were higher across the maturity curve, with the two-year up 2-1/2 Canadian cents to yield 0.982 percent and the benchmark 10-year up 20 Canadian cents to yield 2.418 percent.

View Comments (0)