CANADA FX DEBT-C$ firms as it bounces off key resistance level

Mon Sep 15, 2014 4:34pm EDT
 
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* Canadian dollar at C$1.1050, or 90.50 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Sept 15 (Reuters) - The Canadian dollar firmed
against the greenback on Monday, recovering from a more than
five-month low hit overnight as the currency pairing backed away
from resistance at C$1.11. 
    Investors started the week with some major events on the
horizon, including a policy statement by the U.S. Federal
Reserve on Wednesday and a speech from the head of the Bank of
Canada on Tuesday.
    Also, Scotland's referendum on whether to leave the United
Kingdom will come on Thursday, and a vote for independence would
likely roil markets.
    The U.S. dollar strengthened through some key resistance
levels against the loonie last week and took a run at piercing
the next barrier at C$1.11 in the overnight session but was
unable to push above it.
    "The fact that we couldn't get above the C$1.11 suggests
that the market is very much in a wait-and-see attitude with
those three important items this week," said Don Mikolich,
executive director of foreign exchange sales at CIBC World
Markets in Toronto.
    The Canadian dollar ended the North American
session at C$1.1050 to the greenback, or 90.50 U.S. cents,
stronger than Friday's close of C$1.1094, or 90.14 U.S. cents.
    The loonie shrugged off a number of weak economic figures
from China that came out over the weekend and had prompted some
economists to trim their growth forecasts for the country. The
Canadian currency is often sensitive to economic news from
China, which is a major consumer of resources. 
    Stephen Poloz, governor of the Bank of Canada, will speak on
the topic of the role of a floating exchange rate in his first
speech since the central bank reaffirmed its neutral policy
stance in a statement earlier this month. Poloz's speech will be
followed by a press conference.
    The Fed statement is likely to be the biggest event of the
week, with investors speculating the central bank could provide
insight on when interest rates will start to rise. Any hint that
a rate hike will come sooner rather than later would likely
boost the greenback to the loonie's detriment. 
    A market reassessment of the Fed's next moves caused the
Canadian dollar to lose nearly 2 percent last week, a selloff
that leaves it poised for a bounce-back if Fed Chair Janet
Yellen is more dovish than expected when she holds a press
conference Wednesday, said Scott Smith, senior market analyst at
Cambridge Mercantile Group in Calgary.
    "That being said, that's probably an outlier in terms of
probability. The most likely scenario is that we see a little
bit more of a hawkish rhetoric from the Fed," Smith said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1-1/2 Canadian
cents to yield 1.151 percent, and the benchmark 10-year
 up 5 Canadian cents to yield 2.236 percent.

 (Editing by Peter Galloway)