CANADA FX DEBT-C$ strengthens after housing data; Fed in focus

Tue Jul 9, 2013 4:49pm EDT
 
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* C$ at C$1.0526 vs US$, or 95 U.S. cents
    * June housing starts topped expectations at 199,586 units
    * Markets await Bernanke speech on Wednesday
    * Bond prices mixed

    By Solarina Ho
    TORONTO, July 9 (Reuters) - The Canadian dollar firmed
against the U.S. dollar on Tuesday, helped in part by
stronger-than-expected domestic housing data and firmer oil
prices.
    The seasonally adjusted annualized rate of housing starts
was 199,586 units in June, a decrease from May, which was
revised higher to 204,616. Analysts polled by Reuters had
expected 187,000 starts in June. 
    "It helped early on. But (the housing market) remains too
strong. At some point, there needs to be a correction," said
Charles St-Arnaud, economist and currency strategist in New York
with Nomura Securities.
    Crude oil prices finished the day with moderate gains,
supported in part by worries that violence in Egypt could ignite
conflict in the broader Middle East. 
    The Canadian dollar, which was mostly outperforming
other major currencies, finished its North American session at
C$1.0526 versus the greenback, or 95 U.S. cents. It closed on
Monday at C$1.0560, or 94.70 U.S. cents.
    The U.S. dollar rallied to a three-year high against major
currencies on Tuesday on expectations the Federal Reserve will
reduce stimulus at a time when other major central banks are
likely to ease further. 
    Trading was subdued overall, however, as markets await a
speech by U.S. Federal Reserve Chairman Ben Bernanke on
Wednesday. Investors are keen for any indication of when the Fed
will begin reining in its stimulus. Current expectations are for
sometime this fall.
    "Everything Bernanke says is critically important to the
market these days," said Blake Jespersen, managing director,
foreign exchange sales, at BMO Capital Markets. "We're seeing a
lot of participants waiting for his statement on Wednesday
before putting on much trading activity. 
    "In Canadian dollar terms, we do expect some more weakness,
but it already has moved quite a bit now and we think it is
trying to find somewhat of a bottom around these levels,"
Jespersen added.
    He said C$1.05 to C$1.0650 appears to be the range for the
Canadian dollar over the next little while.
    Prices for Canadian government debt were mixed, with the
two-year bond adding 3 Canadian cents to yield 1.147
percent and the benchmark 10-year bond flat with a
yield of 2.474 percent.