CANADA FX DEBT-C$ falls to 5-month low as finally breaks C$1.10

Thu Sep 11, 2014 4:33pm EDT
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* Canadian dollar at C$1.1047 or 90.52 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Sept 11 (Reuters) - The Canadian dollar shed 1
percent against the greenback on Thursday, gaining momentum as
it cracked the C$1.10 barrier on its third attempt this week to
break through the closely watched resistance level.
    The loonie had earlier been dragged lower by a drop in oil
prices, but the currency continued to fall to a five-month low
even as oil reversed course to push higher.
    Markets this week have been focused on trying to gauge when
the U.S. Federal Reserve might start to raise interest rates,
and investors expect the loonie will continue to take its cues
from the U.S. dollar half of the currency pair.
    The pair pushed through C$1.10 in each of the past two
sessions but had failed to close above it until Thursday. The
level had acted as resistance on several occasions in recent
    "It seems like it's a broad day for U.S. dollar buying and
we might have successfully pierced that C$1.10 psychological
resistance level that's held in place over the last couple of
months," said David Tulk, chief Canada macro strategist at TD
Securities in Toronto.
    "We now seem to be in a potentially new range," Tulk said.
    The Canadian dollar ended the North American
session at C$1.1047 to the greenback, or 90.52 U.S. cents,
weaker than Wednesday's close of C$1.0935, or 91.45 U.S. cents.
    The loonie touched a session low of C$1.1059, its weakest
since the beginning of April. It has shed about 1.5 percent so
far this week, putting it on track for its worst week since
early January when the currency was caught in a heavy selloff. 
    Heading into next week's Fed meeting, speculation has
increased that a rate hike could come sooner than markets have
been anticipating, which would benefit the greenback to the
detriment of the loonie.
    "There's a growing consensus that (the Fed) might alter the
forward guidance to remove the 'considerable time' phrasing
around when they're going to start tightening after they're done
tapering," said Bipan Rai, director of foreign exchange strategy
at CIBC World Markets in Toronto.
    The central bank has said it expects there to be a
"considerable time" before it raises rates following the end of
its bond-buying program, which is expected in October.
    Data that showed new home prices in Canada were unchanged in
July had earlier elicited little reaction from the loonie,
though the mostly second-tier domestic data on offer this week
had not been expected to drive the currency significantly.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1-1/2 Canadian
cents to yield 1.146 percent and the benchmark 10-year
 up 10 Canadian cents to yield 2.195 percent.

 (Editing by Meredith Mazzilli)