3 Min Read
TORONTO (Reuters) - The Canadian dollar weakened modestly against the greenback on Friday as comments by U.S. Federal Reserve Chair nominee Janet Yellen offered no clear path ahead for the loonie.
At a hearing on Thursday on her nomination to head the Fed, Yellen defended the U.S. central bank's steps to spur economic growth and called efforts to boost hiring an "imperative".
The remarks were seen by markets as offering reassurance that the Fed's economic stimulus efforts will continue, but her comments also contained few surprises, leaving the Canadian dollar without a catalyst to go higher.
"Overall, the take away is it signaled continuity at the Fed," said Greg Moore, FX strategist at TD Securities in Toronto.
"(Yellen) did sound a little bit more dovish, but she sounded almost exactly like Bernanke in a lot of what she was saying, so a new Fed chair that is essentially an extension of Bernanke policy doesn't signal that much for QE policy."
The Canadian dollar was at C$1.0472 to the greenback, or 95.49 U.S. cents, slightly weaker than Thursday's close of C$1.0468, or 95.53 U.S. cents.
The loonie will likely trade in a narrow band for the session, in a range between C$1.05 and C$1.0450, Moore said.
The Canadian dollar briefly jumped higher after data showed that strong auto and food sales boosted Canadian manufacturing sales by 0.6 percent in September, more than economists had forecast and putting sales at the highest level since June 2012.
But the gain was short-lived, with market focus quickly returning to the Fed.
"Central banks have a stranglehold on forex markets currently and I do not see that situation changing any time soon," said Dean Popplewell, chief currency strategist at OANDA in Toronto.
While continued accommodative policy from the Fed should support the loonie, uncertainty over the timing of the wind-down of stimulus is keeping the currency in a tight range for now, said Popplewell.
A longer timetable for reducing quantitative easing could boost risk-appetite in the market, ultimately benefiting the Canadian dollar.
Canadian bond yields were mostly lower across the maturity curve, with the two-year bond off 2 Canadian cents to yield 1.117 percent, while the benchmark 10-year bond slipped 8 Canadian cent to yield 2.565 percent.
Editing by Peter Galloway