CANADA FX DEBT-Loonie closes flat vs US$, firms against euro

Fri Nov 1, 2013 4:44pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ at C$1.0427 vs US$, or 95.90 U.S. cents
    * Loonie gains against most currencies, especially euro
    * Canadian bond prices lower across the curve


    By Leah Schnurr
    TORONTO, Nov 1 (Reuters) - The Canadian dollar was unchanged
against the greenback on Friday, consolidating after a recent
drop as investors deliberated the probable path of monetary
policy in Canada and the United States. 
    Against most other major currencies, the loonie rose,
rallying against the euro for a second session as markets
speculated the European Central Bank (ECB) would cut interest
rates as soon as next week.
    The Canadian dollar saw some lingering support from data
released on Thursday that showed the domestic economy grew at a
faster-than-forecast pace in August, helped by expansion in the
oil and gas industry. 
    Market focus, however, stayed on the latest moves from
central banks. A shift in policy by the Bank of Canada last week
 knocked the Canadian currency lower, with the central bank
dropping its rate-hike bias, which pushed analysts' expectations
for an eventual increase in interest rates further into the
future.   
    While the GDP data was impressive, "we don't think that will
be an obstacle to either easing or tightening," said Michael
Woolfolk, senior currency strategist at BNY Mellon in New York.
    "The Bank (of Canada) is very much aware, as the United
States is, that inflation is uncomfortably low and that perhaps
further easing could not only stimulate the economy, but could
serve to stimulate some healthy inflation."
    Earlier this week, the U.S. Federal Reserve stood pat on its
economic stimulus efforts, though it released a statement that
was not as dovish as some had expected.
    The Canadian dollar ended the North American
session at C$1.0427 versus the greenback, or 95.90 U.S. cents,
unchanged from Thursday's close.
    The euro fell sharply against the Canadian dollar as a drop
in euro zone inflation sparked expectations the ECB will ease
monetary policy. The ECB next meets next Thursday.
    Against the Canadian dollar, the euro was at C$1.4061,
making for a drop of more than 2 percent in two days. 
    "That's getting the euro hit pretty hard," said Benjamin
Reitzes, senior economist and foreign exchange strategist at BMO
Capital Markets in Toronto. A rate cut is a possibility, though
the central bank may also want to wait and get another month of
inflation numbers, he said.
    Canadian government bond prices were lower across the
maturity curve. The two-year bond was down 4-1/2
Canadian cents to yield 1.125 percent, and the benchmark 10-year
bond slipped 70 Canadian cents to yield 2.509
percent.