CANADA FX DEBT-C$ falls through C$1.21 ahead of BoC, factory data weighs

Tue Jan 20, 2015 4:45pm EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

(Updates with fresh comment, closing figures, new details)
    * Canadian dollar at C$1.2107 or 82.60 U.S. cents
    * Bond prices rise across the maturity curve

    By Solarina Ho
    TORONTO, Jan 20 (Reuters) - The Canadian dollar slumped to
its weakest level in more than 5-1/2 years against the U.S.
dollar on Tuesday as investor attention shifted to the Bank of
Canada following disappointing factory sales data and a growth
forecast cut by the International Monetary Fund.
    The Bank of Canada is widely expected to keep interest rates
unchanged, but trim its growth forecasts when it issues its
quarterly Monetary Policy Report on Wednesday morning.
    Manufacturing sales fell by 1.4 percent in November due to a
sharp decrease in vehicle sales, according to Statistics Canada.
The figure was double the expected decline, and the third slide
in four months. 
    "It's almost like another screw being turned for people
expecting the Bank of Canada to be a little bit more dovish at
tomorrow's meeting," said Amo Sahota, director at Klarity FX in
San Francisco.
    The IMF also trimmed its economic outlook for Canada in 2015
and 2016, and forecast lower global economic growth.
  
    Sahota said other factors like the massive job losses
resulting from the impending closure of Target Canada stores and
reduced capex spending in the oil industry due to the cheap
price of crude add to pressures.
    "All of a sudden you get a sense that full-capacity may not
be approachable in the near-term. That basically means kicking
the can down the road again," he said.
    The Canadian dollar closed at C$1.2107 to the
greenback, or 82.60 U.S. cents, more than 1-1/2 cents softer
than Monday's finish of C$1.1947, or 83.70 U.S. cents, and the
weakest level since April 2009.
     The Canadian dollar, which some say could retreat to C$1.22
to C$1.24 in the near term, was also weaker against all other
major currencies.
    Bipan Rai, director of foreign exchange strategy at CIBC
World Markets, said the market was also pricing in expectations
that closing the output gap in Canada will take longer than the
Bank of Canada has estimated.
    It was also pricing in the risk that the central bank could
cut rates sometime in the coming year, he said.
    "(A cut)'s a bit aggressive but markets are still looking at
a very soft outlook domestically, going forward," said Rai.
    Canadian government bond prices were higher across the
maturity curve, with the two-year bond up 1.5
Canadian cents to yield of 0.852 percent and the benchmark
10-year bond rising 22 Canadian cents to yield 1.492
percent.

 (Editing by Peter Galloway and Meredith Mazzilli)