CANADA FX DEBT-C$ pulls back from 4-month low, fails to hold key level

Tue Sep 9, 2014 5:31pm EDT
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* Canadian dollar at C$1.0971 or 91.15 U.S. cents
    * Bond prices lower across maturity curve

 (Adds details, quotes; updates prices)
    By Leah Schnurr
    TORONTO, Sept 9 (Reuters) - The Canadian dollar touched a
more than four-month low against the greenback on Tuesday before
recovering to end little changed as the currency pair failed to
hold the closely watched C$1.10-level.
    A reassessment of the monetary policy outlook in the United
States gave the greenback some strength to the detriment of the
loonie the day after research released by the San Francisco
Federal Reserve Bank showed investors expect the Federal Reserve
to keep interest rates lower for longer, and to raise them more
slowly, than policymakers expect. 
    Weaker-than-anticipated housing starts figures for August
also weighed on the Canadian dollar, though analysts say there
is not much in the way of top-tier domestic economic data this
week to drive the loonie. 
    While the currency accelerated its losses in early trade
after it pierced C$1.10, it was able to recover throughout the
session. The C$1.10 mark has posed technical resistance for the
currency pairing on several occasions in July and August.
    "The thought was if we closed above that level, we could see
some further upside moving forward," said Rahim Madhavji,
president a in Toronto.
    A move higher for the U.S. dollar-Canadian dollar pair
results in a weaker loonie.
    "If we couldn't break past C$1.10 and sustain it for a
close, we think it's going to be more rangebound trading,"
oscillating around C$1.09, Madhavji said. 
    The Canadian dollar ended the North American
session at C$1.0971 per U.S. dollar, or 91.15 U.S. cents, a
touch higher than Monday's close of C$1.0973, or 91.13 U.S.
cents. The loonie hit a session low of C$1.1032 - its lowest
since late April.
    Analysts say the Canadian dollar is likely to continue to
take its cues from the greenback's direction as investors focus
on the economic recovery south of the border and when the Fed
will start to raise interest rates.
    "Just the thought that the Fed might start to change a
little bit of its tone at the next meeting, the market is trying
to prepare itself in advance of that and that's been grinding
the U.S. dollar higher," Madhavji added.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 3.2 Canadian
cents to yield 1.140 percent and the benchmark 10-year
 down 32 Canadian cents to yield 2.177 percent.

 (Editing by G Crosse)