CANADA FX DEBT-C$ gains on upbeat Fed stance; oil stays in focus

Thu Dec 18, 2014 5:16pm EST
 
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(Adds comments, closing figures and crude market moves)
    * Canadian dollar ends at C$1.1597 or 86.23 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Dec 18 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Thursday as market appetite for
riskier assets got a lift from the U.S. Federal Reserve's latest
policy comments, while a short-lived rebound in oil prices gave
it an early-day boost.
    The Fed's upbeat assessment of the U.S. economy on Wednesday
and its signal that it would move to tighten policy as planned
helped to buoy equity markets and other riskier assets.
    Crude prices rose early in the session after a number of oil
companies moved to delay plans for new production and to cut
spending. The crude rebound did not last, however, and the
hard-hit commodity ended the session lower.
   
    The loonie has been especially sensitive to plunging oil
prices as Canada is a major oil exporter, but analysts have
noted that its retreat has not been as dramatic as the drops in
the value of currencies of other oil exporting countries.
    "Some of us who may just be dealing in USD-CAD may think our
dollar's been beaten up a fair bit lately, but I think in
relation to some of the bigger moves we saw this week, the
Canadian dollar is actually holding its own," said Ken Wills,
currency strategist and broker at CanadianForex.
    "The other side of the story (is the) positive outlook for
the U.S. economy and Canada benefiting from that."
    The Canadian dollar ended Thursday at C$1.1597 to
the greenback, or 86.23 U.S. cents, stronger than Wednesday's
close of C$1.1639, or 85.92 U.S. cents.
    Investor attention will shift on Friday to a slew of
domestic economic data, including inflation and retail sales.
    "The test for Canada will be if we get soft data at the same
time the U.S. data ... remains strong. Then it's going to put
the divergence between the two central banks in a bit of a
spotlight," said Mark Chandler, head of Canadian fixed income
and currency strategy at RBC Capital Markets.
    The Bank of Canada has been more cautious about an economic
rebound than the Fed and analysts say it seems highly unlikely
it will hike interest rates until sometime after the Fed makes
its first rate move.
    Canadian government bond prices were mixed across the
maturity curve, with longer-term securities generally weaker.
The two-year bond fell 4 Canadian cents to yield
1.020 percent, while the benchmark 10-year bond fell
51 Canadian cents to yield 1.869 percent.

 (Editing by Peter Galloway)