CANADA FX DEBT-C$ holds steady against greenback before Fed news

Tue Jul 30, 2013 9:36am EDT
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* C$ at C$1.0263 or 97.44 U.S. cents
    * Market watches 2-day U.S. Fed meeting for stimulus policy
    * Domestic data shows some inflation in industrial prices
    * C$ hits almost 3-year high vs A$ as Aussie rate cut

    By Alastair Sharp
    TORONTO, July 30 (Reuters) - The Canadian dollar held steady
near a five-week high against its U.S. counterpart in early
trade on Tuesday, as traders await a U.S. Federal Reserve
pronouncement on monetary stimulus policy that could result in a
wild swing in the currency pair.
    If the Fed pulls back aggressively on its monetary stimulus,
C$1.05 could be reached by the week-end, while a limited Fed
move could push the pair back to an equal footing, according to
Adam Button, a currency analyst at ForexLive in Montreal.
    "The spring is coiled very tightly now and whichever way
this C$1.0250/C$1.03 range breaks, you're going to see a
powerful move," Button said.
    The loonie soared to an almost three-year high of 93.05
Canadian cents against its commodity-backed cousin, the
Australian dollar, after that country's central bank
governor fueled expectations of a cut in interest rates next
    The Bank of Canada, conversely, has held to a mild
tightening bias for months, which could be aided by industrial
data that showed a surprise rise.
    "New Bank of Canada Governor Poloz will want to take any
opportunity to establish his inflation-fighting credibility,"
Button said, while cautioning that domestic data would be
dwarfed by potentially explosive news out of a two-day U.S.
Federal Reserve meeting on Tuesday and Wednesday. 
    Producer prices rose 0.3 percent in June from May on the
back of higher prices for autos and gasoline, while raw
materials prices also gained. Analysts had expected no change in
industrial prices. 
    At 9:10 a.m. (1310 GMT) the Canadian dollar was
trading at C$1.0263 to the greenback, or 97.44 U.S. cents,
compared with C$1.0260, or 97.47 U.S. cents, at Monday's North
American close.
    The two-year bond was off half a Canadian cent to
yield 1.165 percent, while the benchmark 10-year bond
 rose 8 Canadian cents to yield 2.486 percent.