CANADA FX DEBT-C$ strengthens as U.S. durable goods orders drop, eye on Fed

Tue Oct 28, 2014 9:52am EDT
 
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* Canadian dollar at C$1.1205 or 89.25 U.S. cents
    * Bond prices mixed

    By Andrea Hopkins
    TORONTO, Oct 28 (Reuters) - The Canadian dollar strengthened
against the greenback on Tuesday after U.S. durable goods orders
came in weaker than expected, helping nudge oil prices higher,
but markets were already looking ahead to the conclusion of the
Federal Reserve's policy meeting on Wednesday.
    The U.S. dollar weakened after government data showed new
orders for capital goods by U.S. businesses recorded their
biggest drop in eight months in September. 
    The drop in the U.S. dollar helped Brent crude oil prices
rise above $86 a barrel. A weaker dollar helps global consumers
buy dollar-denominated commodities such as oil. 
    "Oil has been one of the key drivers of markets generally
and so we have a more encouraging sentiment within market
generally, and typically that's usually a fairly good
environment for the Canadian dollar," said Camilla Sutton, chief
currency strategist at Scotiabank.
    "But the broad picture is that the Canadian dollar has
really been stuck in a range, a lot of currencies have, trying
to look for where the next shift is going to be, and with the
Fed meeting tomorrow, that puts a big risk in the horizon."
    While the Fed is expected to announce the end of its
bond-purchase program at the conclusion of its two-day meeting,
the U.S. central bank will likely reinforce its willingness to
wait a while before raising interest rates. 
    At 9:19 a.m. Eastern time the Canadian dollar was
at C$1.1205, or 89.25 U.S. cents, stronger than Monday's North
American session at C$1.1238, or 88.98 U.S. cents.
    Sutton expects the currency will trade between C$1.1200 and
Tuesday's opening level at C$1.1247, but she said if the loonie
breaks through the C$1.1200 level it could test last week's
strength of C$1.1184.
    At home, traders are looking ahead to testimony by Bank of
Canada Governor Stephen Poloz to the Senate banking committee on
Wednesday. His testimony had been scheduled for last week but
was canceled due to a gunman's attack on Parliament Hill.
 
    Canadian government bond prices were mixed, with the
two-year up half a Canadian cent to yield 1 percent.
The benchmark 10-year was down 3 Canadian cents to
yield 2.018 percent.

 (Reporting by Andrea Hopkins; Editing by Chris Reese)