CANADA FX DEBT-C$ flat as investors await fiscal cliff talks

Fri Dec 28, 2012 7:49am EST
 
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* C$ flat at C$0.9951 vs US$, or $1.0049
    * Investors anxious amid focus on U.S. budget talks
    * Bond prices higher across the curve

    By Andrea Hopkins
    TORONTO, Dec 28 (Reuters) - The Canadian dollar was flat
against its U.S. counterpart on Friday as investors waited for
the resumption of talks in Washington to avoid a fiscal crisis
and currency players squared positions for year-end and
month-end balances.
     World shares sagged and the dollar climbed as U.S.
President Barack Obama and lawmakers were set to have a last
round of talks before a New Year's deadline to reach a deal and
avoid massive tax hikes and spending cuts that could drag the
economy, and others around the world, into recession.
 
    Obama and Vice President Joe Biden will meet congressional
leaders from both parties at the White House at 2000 GMT.
  
    Commodity-linked currencies like the Canadian dollar tend to
benefit when U.S. budget negotiations run smoothly, but when
there are snags, investor flows go into the highly liquid U.S.
dollar. 
    "Canada is sidewise, there is not much to say when the range
is 17 points. The flow in dollar-Canada is really in many
respects a microcosm of the overall flow, which is a function of
'cliff' developments," said Jack Spitz, managing director of
foreign exchange at National Bank Financial.
    "That being said, we remain cognizant of month-end as well
as well as year-end rebalancing flow as well as repatriation,
all of which is expected to be U.S. dollar positive. Add to the
equation, thin market conditions and an overall Street that is
sensitive to position squaring."
    At 7:30 a.m. (1230 GMT), the Canadian dollar stood
at C$0.9951 versus the U.S. dollar, or $1.0049, barely changed
from Thursday's North American session close at C$0.9949 versus
the U.S. dollar, or $1.0051.
    The Canadian currency hit C$0.9959 on Thursday, its weakest
level since Nov. 28, after U.S. Senate Majority Leader Harry
Reid, the top Democrat in Congress, warned a deal was unlikely
before the deadline.
    Canadian government bond prices were higher across the curve
on the flight to safety. The two-year bond was up 2 
Canadian cents, yielding 1.127 percent, while the benchmark
10-year bond rose 8 Canadian cents to yield 1.786
percent.