CANADA FX DEBT-C$ weakens in choppy trade after Fed rate forecasts

Wed Sep 17, 2014 4:50pm EDT
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* Canadian dollar at C$1.1004 or 90.88 U.S. cents
    * Bond prices lower across the maturity curve

 (Adds Fed details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Sept 17 (Reuters) - The Canadian dollar weakened
against the greenback on Wednesday, reversing in the face of a
broad surge in the U.S. dollar as the Federal Reserve hinted at
a quicker pace for raising interest rates even as it stuck to
its accommodative policy language.
    The Fed's policy statement had been one of the most
anticipated events of the week and speculation over what the Fed
would signal for its timing on rate hikes had caused sharp
gyrations in both directions for the loonie in recent sessions.
    While the U.S. central bank repeated that rates will stay
low for a "considerable time" after its bond-buying program
ends, it issued projections that suggested officials saw rates
potentially rising faster once they start to raise them than
they had previously forecast in June. 
    The market also latched on to the Fed's new blueprint for
how it plans to exit the extraordinary monetary stimulus it put
in place in response to the global financial crisis.
    "They like the fact that there's an exit policy, and that is
important," said Amo Sahota, director at Klarity FX in San
    "I think given the construct of what else is happening
globally and where Europe is, it's a prudent thing to do to
leave the language still the same, that 'considerable' period of
    The Canadian dollar ended the North American
session at C$1.1004 to the greenback, or 90.88 U.S. cents,
weaker than Tuesday's close of C$1.0970, or 91.16 U.S. cents.
    While there has been a lot of volatility for the loonie in
the last week stemming from shifting speculation around the Fed,
analysts expect that when all is said and done, the Canadian
dollar is in for further weakness by the end of the year.
    With a number of potentially market-moving events still to
come, including Scotland's referendum on independence from the
United Kingdom and Canadian inflation data, the currency will
likely remain choppy through the rest of the week, said Greg
Moore, senior currency strategist at Royal Bank of Canada in
    "We do expect the stronger U.S. dollar-Canadian dollar trend
to reassert itself a little bit more clearly in the fourth
quarter, as some of the bigger driving themes start to unfold,"
particularly the divergence between the Fed and the Bank of
Canada, said Moore, who expects to see the loonie at C$1.15 by
the end of the year.
    Canadian government bond prices were lower across the
maturity curve, with the two-year off 3 Canadian
cents to yield 1.165 percent and the benchmark 10-year
 down 18 Canadian cents to yield 2.263 percent.

 (Editing by James Dalgleish)