CANADA FX DEBT-C$ nears 3-week high; Bank of Canada, Fed in view

Wed Oct 29, 2014 9:52am EDT
 
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* Canadian dollar at C$1.1129 or 89.86 U.S. cents
    * Bond prices mostly weaker

    By Andrea Hopkins
    TORONTO, Oct 29 (Reuters) - The Canadian dollar strengthened
to its highest against the greenback in nearly three weeks on
Wednesday as rising oil prices continued to bolster the
currency, while the market awaited news later in the day from
the U.S. Federal Reserve and the Bank of Canada.
    World stock markets rose and major government bond yields
were little changed as markets anticipated a soothing message
from the Fed when it ends its two-day policy meeting. Analysts
expected the Fed to signal that it will not raise interest rates
for some time. 
    Traders in Canada were awaiting testimony by Bank of Canada
Governor Stephen Poloz at the Senate banking committee. The
appearance had been scheduled for last week but was canceled due
to a gunman's attack on Parliament Hill. 
    Brent crude oil rose above $87 a barrel as traders bet the
Fed would keep U.S. interest rates low. That lifted the Canadian
currency, but Jeremy Stretch, head of foreign exchange strategy
at CIBC World Markets in London, said the loonie's show of
strength may be short-lived.
    "For me, down at these levels of C$1.1135 to C$1.1145, there
is a bit of value in buying down there, assuming that we're
going to continue to see the Bank of Canada providing a
relatively dovish bias as far as Mr. Poloz when he appears in
Ottawa later, and assuming that the market is somewhat overly
complacent as regards inertia from the Fed," Stretch said.
    At 9:24 a.m. EDT (1324 GMT) the Canadian dollar was
at a session high of C$1.1129, or 89.86 U.S. cents, stronger
than Tuesday's North American session close of C$1.1171, or
89.52 U.S. cents. That was its strongest point since Oct. 9.
    Stretch said he expects these levels to be the high point of
the day, with C$1.1210 as the opposite end of the trading range
for the session.
    While the Fed is expected to announce the end of its
bond-purchase program at the conclusion of its two-day meeting,
it will likely reinforce its willingness to wait before raising
interest rates. 
    Poloz begins his testimony at 4:15 p.m. EDT (2015 GMT). The
central bank has kept its main policy rate at 1 percent since
September 2010.
    Canadian government bond prices were mostly weaker, with the
two-year down half a Canadian cent to yield 1.015
percent. The benchmark 10-year was down 12 Canadian
cents to yield 2.043 percent.

 (Reporting by Andrea Hopkins; Editing by Peter Galloway)