CANADA FX DEBT-C$ overlooks U.S. results in rangebound trade

Wed Jan 9, 2013 4:59pm EST
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* C$ ends at C$0.9877 vs US$, or $1.0125
    * Bond prices little changed across curve
    * Investors eye European, Canada central banks

    By Claire Sibonney
    TORONTO, Jan 9 (Reuters) - Canada's dollar ended slightly
lower against its U.S. counterpart on Wednesday, shrugging off a
modest rally in other riskier assets after Alcoa opened
the U.S. earnings season with an optimistic outlook.
    Global equities staged a modest recovery after two days of
losses. Even with the encouraging Alcoa report, investors lacked
a clear view of how U.S. corporations fared in the
fourth-quarter and the Canadian currency was rangebound. 
     Adam Cole, global head of FX strategy at RBC Capital
Markets in London, expected more reaction to U.S. earnings once
they picked up steam.
    "If that's where stocks take their direction then it's
difficult to get away from that, being a fairly major barometer
of pressure on CAD," he said.
    There was caution a day ahead of European and British
central bank policy meetings, as well as a Spanish auction that
will test appetite for peripheral euro zone debt, and Chinese
trade data.
    On the home front, the next major event of interest is a
speech on Thursday by Tiff Macklem, a senior Bank of Canada
official widely tipped to replace the departing Governor Mark
    "Investors are looking toward Tiff Macklem's speech to see
if there are any hints of his policy takes, if they're any
different from Carney's, which is highly unlikely I think," 
said John Curran, senior vice president at CanadianForex.
    "If anything, the Canadian dollar is remaining in positive
territory recently speaking due to last week's (jobs) numbers
and expectations that frontrunner Macklem is going to be towing
the line so to speak with previous BoC sentiment."
    The Bank of Canada stands apart from other major central
banks in that it avoided large bouts of quantitative easing and
now insists the next move in interest rates is likely to be up.
    The Canadian dollar ended the North American
session at C$0.9877 versus the greenback, or $1.0125, slightly
weaker than Tuesday's close at C$0.9867, or $1.0135. It traded
in a tight 26-point range between C$0.9855-C$0.9881.

    U.S. profits were expected to beat the previous quarter's
lackluster results, but analyst estimates were down sharply from
October. Quarterly earnings were expected to grow by 2.7
percent, according to Thomson Reuters data.
    RBC noted near-term U.S. dollar resistance versus the
Canadian dollar around C$0.9947 and support near C$0.9826.
    Analysts noted that the looming U.S. debt ceiling talks also
kept investors on the sidelines. 
    Still, the Canadian dollar was outperforming some other
major currencies such as the yen, as renewed expectations of
easier Bank of Japan monetary policy led some investors to sell
the Japanese currency. 
    Canadian bond prices were also little changed across the
curve. The two-year bond was off nearly 1 Canadian
cent to yield 1.168 percent, while the benchmark 10-year bond
 was down 2 Canadian cents to yield 1.910 percent.