Loonie rises on firm data, bonds sag

Tag : Composite Fertilizer

By John McCrank
TORONTO (Reuters) - The Canadian dollar was higher against the U.S.dollar on Friday morning after Canadian wholesale trade data forMay came in stronger than expected, helping boost confidence in theeconomy.
Bond prices fell in response to firmer equities markets and thesolid data.
At 9:34 a.m., the Canadian dollar was at C$1.0030 to the U.S.dollar, or 99.70 U.S. cents, up from C$1.0068 to the U.S. dollar,or 99.32 U.S. cents, at Thursday's close.
The currency spent the overnight session in a narrow range ofC$1.0037 and C$1.0057, then rose on the back of the data.
"I think the wholesale number was quite a strong number andsuggests the economy continues to move along quite well here," saidShaun Osborne, chief currency strategist at TD Securities.
Statistics Canada said Canadian wholesale trade jumped 1.6 percentin May from April, thanks to higher global demand for fertilizer.It was the biggest monthly increase since January, with only theauto sector posting a contraction. Excluding autos, wholesale saleswere up 2.2 percent.
The median forecast by analysts surveyed by Reuters was for a 0.5percent monthly gain.
Other data showed that Canada's composite leading index wasunchanged in June, following two months of gains, as weakness inhousing and new orders for factory goods offset strong consumerspending.
Looking at the prospects for the Canadian dollar going forward,Osborne said there is a risk of the currency weakening against theU.S. dollar. The greenback has been helped by a more than $15dollar a barrel drop in the price of oil this week.
"Oil prices are still looking relatively soft and over the nextlittle while, I think there is there is a possibility that we tradeup to the C$1.01 area," he said.
High oil prices were seen hurting growth and strengtheninginflation in the world's biggest economy.
BOND PRICES SAG
Bond prices, which have been under pressure the past few days,continued their slide lower as firmer North American stock marketscut into the safe-haven bid for government debt.
The wholesale trade data added to the pressure on Canadian bonds,said Doug Porter, deputy chief economist at BMO Capital Markets.
"Overall, the main impression from these numbers is that theeconomy probably turned out a little more growth in May and stayedon the plus side of the column in the second quarter."
The two-year bond fell 4 Canadian cents to C$101.12 to yield 3.126percent. The 10-year bond slid 17 Canadian cents to C$103.70 toyield 3.796 percent.
The yield spread between the two-year and 10-year bond was 67.3basis points, up from 65.7 basis points.
The 30-year bond lost 30 Canadian cents to C$114.05 for a yield of4.159 percent. In the United States, the 30-year treasury yielded4.634 percent.
The three-month when-issued T-bill yielded 2.33 percent, down from2.37 percent at the previous close.
(Editing by Peter Galloway)
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