CANADA FX DEBT-C$ weakens after China data, eyes BoC statement

Fri Apr 13, 2012 5:16pm EDT

* C$ at C$0.9984 vs US$, or $1.0016
    * China data, Spanish yields hurt sentiment
    * Traders look ahead to BoC statement on Apr 17
    * Bond prices climb across curve

    By Jon Cook 
    TORONTO, April 13 (Reuters) - The Canadian dollar slid
against its U.S. counterpart on Friday as sluggish Chinese
growth and Europe's lingering debt mess weakened risk sentiment,
but hopes for a rosier outlook from the Bank of Canada next week
boosted Canada's currency above other majors. 
    The euro fell against the U.S. dollar for the second
straight week as rising Spanish borrowing costs spooked
investors. Global growth fears were compounded by data that
showed China's economy grew less than expected in the first
quarter.  
    While nervous investors sought refuge in the U.S. dollar,
Canada's currency outperformed the euro, sterling, Swiss franc
and Australian dollar. 
    "It's a decent performance given the risk aversion we've
seen come back to the fore," said Mark Chandler, head of
Canadian fixed income and currency strategy at RBC Capital. 
    The Canadian dollar finished at C$0.9984 versus the
U.S. dollar, or $1.0016, down from Thursday's North American
finish at C$0.9945 versus the U.S. dollar, or $1.0055. It edged
down 0.1 percent for the week. 
    Canada's triple-A rated economy, underscored by last month's
strong employment numbers and a continued hot housing market,
has become increasingly attractive to foreign investors worried
about volatility in Europe and slowing growth in China. 
    Chandler said another factor keeping the Canadian dollar
from weakening further was anticipation that the Bank of Canada
would be "a bit more hawkish" in next week's rate statement and
Monetary Policy Report. 
    Bank of Canada's next policy announcement date is April 17.
The next day it will offer detailed forecasts in its quarterly
Monetary Policy Report, followed by a press conference by
Governor Mark Carney.  
    The median forecast in a Reuters poll of 40 economists and
strategists shows the next interest rate hike will come in the
second quarter of 2013.  
    "No one expects any imminent signals of an immediate rate
hike, but I think the tone has changed dramatically out of the
Bank of Canada," said Firas Askari, head of foreign exchange
trading at BMO Capital Markets.  
    Higher interest rates or expectations of higher rates tend
to help currencies strengthen by attracting international
capital flows. 
    The Canadian dollar was still seen trading within a narrow
range of between C$0.99 and C$1.01 for the near term. 
    Canadian government bond prices climbed across the curve,
with Canada's two-year bond up 6 Canadian cents to
yield 1.203 percent. The 10-year bond added 53
Canadian cents to yield 1.997 percent.