CANADA FX-C$ recovers amid Fed afterthought

Wed Jun 20, 2012 1:34pm EDT
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* Canada dollar at C$1.0176 vs US$, or 98.27 U.S. cents

* Bond prices extend losses across curve

* Fed extends Operation Twist bond-buying program

By Claire Sibonney

TORONTO, June 20 (Reuters) - The Canadian dollar recovered from a session low against its U.S. counterpart on Wednesday after a volatile reaction to the U.S. Federal Reserve's decision to extend its monetary stimulus to a U.S. economic recovery that looks at risk of stalling.

Following the announcement, the currency weakened as far as C$1.0232 versus the greenback, or 97.72 U.S. cents, from around C$1.0203, or 98.01 U.S. cents heading into the Fed's release.

The Fed, as expected, said it was extending Operation Twist, an effort to depress borrowing costs by selling short-term bonds to buy longer-dated ones. The U.S. central bank will buy $267 billion in longer-dated securities through the end of 2012. The Fed's "Twist" program was set to end this month.

The Canadian dollar's initial knee-jerk negative reaction mimicked a fall in equity markets and a rally in the U.S. dollar.   Continued...