CANADA FX DEBT-C$ steady as Fed moves closer to hike, oil prices rebound

Wed Dec 17, 2014 4:42pm EST
 
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* Canadian dollar at C$1.1639 or 85.92 U.S. cents
    * Bond prices softer

    By Solarina Ho
    TORONTO, Dec 17 (Reuters) - The Canadian dollar held steady
against the greenback on Wednesday, as a surge in oil prices
offset a strong signal from the U.S. central bank that it was on
track to raise interest rates sometime next year.
    The Federal Reserve altered a pledge to keep rates near zero
for a "considerable time" in a show of confidence in the U.S.
economy. 
    The prospect of higher interest rates helped the U.S. dollar
rally against a range of currencies. 
    "It's a nice transitionary statement. Definitely a little
bit less dovish, getting into the next stage of the cycle," said
David Tulk, chief Canada macro strategist at TD Securities.
    "It's shifting the focus away from accommodation and
gradually more toward the withdrawal of stimulus."
    The Canadian dollar finished the session at
C$1.1639 to the greenback, or 85.92 U.S. cents, little changed
from Tuesday's close of C$1.1636, or 85.94 U.S. cents. 
    The currency, which was outperforming a number of other
major counterparts, saw a swing of nearly a cent following the
Fed statement as markets tried to interpret its intentions.
    Financial markets took the Fed's initial wording as dovish,
sending the loonie to C$1.1560 against the U.S. dollar, or 86.51
U.S. cents, before further comments dispelled that view.
    Yellen also said that the plunge in oil prices was "a net
positive" for the U.S. economy. That plunge has been more
painful in Canada, a major exporter of oil, with the loonie
tracking declines in crude prices.
    The Canadian dollar saw gains earlier in the session after
oil, which has lost nearly half its value over the last six
months on an excess of supply, jump nearly five percent. 
    The big gains came after crude prices failed to sink to new
lows following bearish crude stockpile data, prompting
speculators to buy up contracts or take profits on short
positions. 
    Canadian government bond prices were mostly weaker. The
two-year bond slipped 10 Canadian cents to yield
0.998 percent and the benchmark 10-year fell 52
Canadian cents to yield 1.806 percent.

 (With additional reporting by Jeffrey Hodgson; Editing by Chris
Reese)