CANADA FX DEBT-Canadian dollar eases as QE rally runs out of steam

Mon Sep 17, 2012 8:28am EDT
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* C$ at C$0.9730 vs US$, or $1.0277 U.S. cents
    * Bond prices edge higher across the curve

    By Claire Sibonney
    TORONTO, Sept 17 (Reuters) - The Canadian dollar slipped
against its U.S. counterpart on Monday, easing further from
13-month highs hit in the previous session as investors
continued to book profits and reassess the impact of yet another
round of U.S. monetary stimulus.
    Promised support from the U.S. and euro zone central banks
have propelled the risk-related Canadian currency up nearly 8
percent since its lows in June. The Fed announced last week that
it  plans to pump an extra $40 billion a month into the economy
until jobs data improves, while the European Central Bank
outlined its new bond-buying initiative earlier in the month.
    "Obviously the thought of open-ended QE is a bit shocking
and ... it shows how desperate the Fed is at the moment, so in a
lot of ways it's not really a good thing," said Steve Butler,
director of foreign exchange trading at Scotiabank.
    At 8:12 a.m. (1212 GMT), the Canadian dollar was at
C$0.9730 versus the greenback, or $1.0277, weaker than Friday's
finish at C$0.9712 versus its U.S. counterpart, or $1.0297.
    Grim Canadian manufacturing sales data on Friday also
dampened some investor enthusiasm that was built up over the
broader risk rally.
    "The market is probably a little bit overextended," added
Butler. "I think it feels like the market is still looking to
buy Canada but possibly holding out for better levels closer to
C$0.98 now."
    Data that showed China's factory sector shrank for an eighth
straight month in June also weighed on commodity prices and
Canada's resource-linked currency. 
    Canadian government bond prices inched up across the curve
as safe-haven assets came back into play. The two-year bond
 was up 2 Canadian cents to yield 1.189 percent, while
the benchmark 10-year bond added 8 Canadian cents,
yielding 1.961 percent.