CANADA FX DEBT-C$ steadies from 4-week high ahead of Fed decision

Wed Jun 20, 2012 9:27am EDT
 
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* C$ flat at C$1.0181 vs US$, or 98.22 U.S. cents
    * Earlier, C$ hit 4-week high against greenback
    * Bond prices retreat across curve
    * FOMC statement due at 12:30 ET

    By Claire Sibonney
    TORONTO, June 20 (Reuters) - The Canadian dollar steadied
against the U.S. dollar on Wednesday after hitting its strongest
level in more than four weeks, as investors hesitated to be too
optimistic that the U.S. Federal Reserve will announce further
monetary stimulus later in the day.
    Amid rising financial strains in Europe, a year-end fiscal
showdown in Washington and a sharp slowdown in hiring by U.S.
employers, expectations have risen that the central bank will
extend its bond-buying program, dubbed "Operation Twist."
 
    The Fed's Open Market Committee's policy statement is due at
 12:30 p.m. (16:30 GMT), followed by the Summary of Economic
Projections at 2 p.m. and Chairman Ben Bernanke's press
conference at 2:15 p.m.
    "It certainly seems to be that the market is placing some
sort of onus or impetus on extending Operation Twist or giving a
nod to further quantitative easing, so the proof will be in the
pudding really and we'll take our cue from the announcement,"
said Matt Perrier, director of foreign exchange sales at BMO
Capital Markets.
    "Certainly if there's no inclination towards an extension of
the Operation Twist or any additional easing then I think this
recent  risk rally will unwind rather quickly."
    At 9:15 a.m., the Canadian dollar stood at C$1.0181
versus the U.S. dollar, or 98.22 U.S. cents, little changed from
Tuesday's North American close at C$1.0182 versus the U.S.
dollar, or 98.21 U.S. cents.
    Earlier, the currency hit a high of C$1.0159, or 98.43 U.S.
cents, its strongest level since May 22.
    "It's good news if you're a U.S. dollar buyer," added
Perrier. He put U.S. dollar support around C$1.0125, near the 50
percent retracement level from its April low against the
Canadian dollar around C$0.98 to a high of C$1.0446 reached a
couple weeks ago.
    Perrier sees near-term resistance for the U.S. dollar
between C$1.02 and C$1.0225.
    Canadian bond prices retreated across the curve. Canada's
two-year bond fell 8 Canadian cents to yield 1.081
percent, while the benchmark 10-year bond dropped 31
Canadian cents to yield 1.792 percent.