CANADA FX DEBT-C$ holds steady as central bank policies mulled
* C$ at C$0.9745 vs US$, or $1.0262 * BoC's hawkish stance helping C$ attract int'l flows * Bonds rise across curve By Solarina Ho TORONTO, Sept 19 (Reuters) - Canada's dollar was a notch higher against its U.S. counterpart on Wednesday, trading within a narrow range and bucking a fall in oil prices, as the market contemplated the implications of easing monetary policies among central banks. The Bank of Japan became the latest major central bank to ease its monetary policy, increasing asset purchases by more than double what some had expected. Overnight, the yen weakened to a four-month low to the Canadian dollar before recovering. Japan's move followed similar steps from the Federal Reserve and the European Central Bank this month. Meanwhile, the euro erased gains as investors waited to see whether Spain would apply for aid and trigger the European Central Bank's bond-buying program. "The market is just digesting all that information and trying to understand what it means. In principle, they're great initiatives," said Gareth Sylvester, director at Klarity FX. He said the stimulus measures have helped the financial markets, but added, "is it now really going to have the desired effect on the real economy? ... The market is in a bit of a holding pattern after last week's volatility and reaction to the Fed and the ECB." The Canadian dollar closed Wednesday's North American session at C$0.9745 versus the U.S. dollar, or $1.0262, essentially unchanged from Tuesday's finish at C$0.9746, or $1.0261. "My sense is Canada should weaken off a little bit from these levels, but I am surprised by the amount of Canadian dollar buyers we are seeing every time we get above C$0.9750," said Firas Askari, head of foreign exchange trading at BMO Capital Markets. Askari said fundamentally, the currency should be trading closer to the C$0.98 and C$0.9850 range. But with Canada being the only member of the Group of Seven wealthy nations that has a central bank with a tightening bias, he said the currency is attracting international capital flows. If the currency can break through the C$0.9765 to C$0.9780 range, analysts believe the Canadian dollar could test the C$0.9890 to C$0.9900 range. Strategists say there is little to sway the markets this week, however, with Canadian inflation data this Friday the first piece of major economic news since the Fed announced its latest monetary policy. Canadian government bond prices rose across the curve. The two-year bond climbed 2.5 Canadian cents to yield 1.167 percent, while the benchmark 10-year bond gained 23 Canadian cents, yielding 1.890 percent.
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