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Canada $ closes

flat, bonds mixed

TORONTO: The Canadian dollar closed flat for the second day this week, trapped in a tight range in very quite trade.

It's brutal. It's really quite", one dealer said.

A lot of Canada buyers and U.S. sellers are congested between C$1.3630 and C$1.3650 with stop-loss orders crowded below C$1.3600.

"The market has no inclination to take the stops out and the market's cognizant there are a lot of U.S. dollar sellers above C$1.3630, "the dealer added.

Little change is expected overnight.

The unit showed early strength on Tuesday when Canadian economic data showed that Canada's March consumer price index rose 1.4 percent on an annualized basis.

Other data showed Canada's merchandise trade surplus narrowing in February to C$1.89 billion from C$2.53 billion in January, while Canada's leading indicator rose 0.7 percent in March after a 0.5 percent rise in February.

Dealer could not forecast any significant data or event that would push the unit out of its recent range, but said any improvement to C$1.3500 could prompt another rate cut by the Bank of Canada.

The Canadian dollar closed at C$1.3623 (US$0.7341) on Tuesday compared to C$1.3625 (US$0.7339). On the crosses, the Canadian dollar was up slightly at 1.1176 marks from Monday's close of 1.1127 marks, and gained to 78.33 yen from 78.18 yen.

Canadian bonds closed mixed on Tuesday as Canadian economic data prompted profit-taking at the front end of the yield curve, while longer term issues gained, dealers said.

"There's obviously a little bit of concern in the short end with the trade surplus plummeting and inflation being a bit worse," said Hank Cunningham, a bond trader with First Marathon Securities. "It's thin trading I think overall."

Canada's 9.00 percent bond due 2025 rose C$0.17 to C$108.70 to yield 8.209 percent while the US 30-year bond fell 13/32 to yield 6.78 percent.

The spread between the Canadian and US benchmark bonds narrowed to 143 basis points from 147 basis points at Monday's close.

Canada's unadjusted February consumer price index rose a slightly higher-than-expected 0.4 percent in the month, Statistics Canada said on Tuesday .

The federal agency also said the country's merchandise trade surplus narrowed in February to C$1.89 billion from C$2.53 billion in January.

The data helped to prompt some profit taking in shorter-term bonds, analysts said.

Longer-term issues gained as investors remained focused on Canada's positive fundamentals, such as an improving fiscal situation, analysts said.

In other prices, the 8.75 percent of 2005 was rose C$0.05 to C$107.16 to yield 7.680 percent against the U.S. 10-year benchmark, which yielded 6.52 percent for a spread of 116 basis points.-Reuter