C$ eases modestly as Chinese trade data drags

TORONTO: The Canadian dollar was marginally softer against the US dollar on Monday as Chinese exports unexpectedly sank in February, sparking fears about the outlook for China, the world's second-largest economy and one of the biggest buyer of commodities.

Chinese exports fell 18 percent from a year ago, swinging the trade balance into deficit. The Lunar New Year holiday was blamed for the sharp decline, though the data followed a series of factory surveys this year that hint at softer demand in China and abroad.

Falling oil prices, hit in part by the Chinese data, also pressured the commodities-sensitive currency.

"This weakness is probably coming from marginally lower commodity prices on the day," said Charles St-Arnaud, Canadian economist and currency strategist in New York with Nomura Securities International.

The Canadian dollar, which was underperforming most other key currencies, finished Monday at C$1.1101 to the greenback, or 90.08 US cents, weaker than Friday's close of C$1.1090, or 90.17 US cents.

It eased alongside its sister currency, the Australian dollar, which is even more closely tied to the health of the economy in China. But the move was marginal relative to Friday's retreat on the disappointing Canadian jobs data.

"It's still relatively small movements," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada, noting the dearth of domestic data.

The only significant domestic data in Canada on Monday was housing starts, which rose more than expected in February, but did little to change expectations that the Canadian housing market will cool in 2014.

With little in the way of domestic data this week, St-Arnaud expects the currency's moves to remain limited. US retail sales, which fell unexpectedly in January amid unseasonably cold weather, could be one potential driver later this week.

Canadian government bond prices were mostly higher across the maturity curve, with the two-year bond up 1.7 Canadian cents to yield 1.043 percent and the benchmark 10-year up 22 Canadian cents to yield of 2.498 percent.