CANADA FX DEBT-C$ spikes to highest level in over 13 months

Tue Sep 11, 2012 8:24am EDT
 
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* C$ rises on expectations of action by Federal Reserve
    * Bond prices drift lower across the curve

    By Claire Sibonney
    TORONTO, Sept 11 (Reuters) - The Canadian dollar surged to
its strongest level in more than 13 months against its U.S.
counterpart on Tuesday, lifted by expectations the U.S. Federal
Reserve would unveil further steps to stimulate its economy this
week.
    Poor U.S jobs data last week raised expectations the Fed
will launch another asset purchase program, a move that would
weigh on the U.S. dollar against higher-yielding currencies such
as Canada's. The Fed will begin a two-day policy meeting on
Wednesday. 
    By contrast, Canada's stronger-than-expected domestic
employment numbers were seen bolstering the Bank of Canada's
already hawkish stance. 
    "The market is comfortable from both a technical and
fundamental perspective to push the Canadian dollar higher, and
in the absence of any cautionary talk from the Bank of Canada or
the finance minister it looks like it's going to continue to
trend that way," said Jack Spitz, managing director of foreign
exchange at National Bank Financial.
    "The inference is that the Bank of Canada will be the first
of the G7 countries to raise interest rates as soon as markets
'normalize'."
    In addition to the Fed's policy announcement at the close of
its meeting on Thursday, markets are awaiting a German ruling on
the euro zone's new bailout fund and an election in the
Netherlands.
    At 8:13 a.m. (1213 GMT), the Canadian dollar was at
C$0.9719 versus the greenback, or $1.0289, after hitting its
highest level since Aug. 4, 2011.
    The currency ended Monday's North American session at
C$0.9775, or $1.0230.
    Spitz noted that the next significant resistance level for
the Canadian dollar was around a July 2011 high at C$0.9407.
    Canadian government bond prices retreated across the curve,
with the two-year bond off 3 Canadian cents to yield
1.174 percent and the benchmark 10-year bond down 18
Canadian cents, yielding 1.845 percent.