CANADA FX-C$ weakest since early September on soft inflation

Fri Oct 19, 2012 9:53am EDT
 
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* C$ hits C$0.9894 vs US$, or $1.0107
    * Lowest level since Sept. 6
    * Soft Canadian inflation data limits chance of rate rise
    * Currency set for 1 pct decline on week

    By Alastair Sharp
    TORONTO, Oct 19 (Reuters) - The Canadian dollar hit its
weakest level against the U.S. currency since early September on
Friday as soft Canadian inflation data weighed on rate rise
expectations and disappointing U.S. corporate earnings cast a
pall over the market.
    Prices in Canada rose at a similarly low rate in September
as they did in August, leaving little justification for the Bank
of Canada to maintain a hawkish bias when it announces its
latest interest rate decision next Tuesday. 
    "The (inflation) report should weigh towards a softer
dollar, given the implications for the Bank of Canada," said Sal
Guatieri, senior economist at BMO Capital Markets.
    At 9:30 a.m. (1330 GMT) the Canadian dollar was
trading at C$0.9894 to the greenback, or $1.0107, compared with
C$0.9849, or $1.0153, at Thursday's North American close. 
    At one point it reached C$0.9905, its weakest level since
Sept. 6, after sliding the previous day on a host of negative
factors.
    The currency has fallen 1 percent so far this week after
Bank of Canada Governor Mark Carney failed to mention an
intention to raise interest rates in speech he gave on Monday.
 
    Overnight index swaps, which trade based on expectations for
the central bank's key policy rate, showed that after the
inflation data traders slightly increased their small bets on a
rate cut in the coming year. 
    A Reuters poll released on Thursday suggested the central
bank will postpone interest rate hikes until the fourth quarter
of next year and will likely water down, rather than eliminate,
its hawkish language. 
    Declines in the price of gold and copper also weighed on the
currency, while a handful of disappointing U.S. earnings reports
added to the pessimistic tone. 
    Major tech corporates Microsoft and Google 
issued lackluster earnings on Thursday, while General Electric's
 reported revenue early on Friday that fell short of
expectations.