CANADA FX DEBT-C$ firms as greenback weakens; focus on Fed

Tue Jan 27, 2015 10:22am EST
 
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* Canadian dollar at C$1.2406 or 80.60 U.S. cents
    * Bond prices higher across the maturity curve

    TORONTO, Jan 27 (Reuters) - The Canadian dollar strengthened
against a broadly weaker U.S. dollar on Tuesday with oil prices
stable and the market shifting focus toward this week's U.S.
Federal Reserve policy meeting.
    The greenback fell after data showed U.S. durable goods
orders for December were weaker than expected, while quarterly
results from U.S. companies pushed the stock market into
negative territory.
    "Essentially (it has) given a little bit of a pause in the
U.S. dollar rally, so you're seeing U.S. dollars in general
being sold," said Brad Schruder, director, foreign exchange
sales, at BMO Capital Markets in Toronto.
    "But the overall theme remains the same: Look for
opportunities to get short on the Canadian dollar."
    Schruder said there was a slight chance the currency could
dip below 1.24 during the session, but more broadly, there was
no room to be bullish on Canada, he said, given the country's
stimulative monetary policy. 
    The Bank of Canada shocked markets last week when it cut
interest rates by 25 basis points to 0.75 percent. Markets are
now pricing in a 62 percent chance of another rate cut in March,
when the central bank makes its next policy decision. 
    At 9:43 a.m. EST (1343 GMT), the Canadian dollar 
was at C$1.2406 to the greenback, or 80.60 U.S. cents, stronger
than Monday's finish of C$1.2464, or 80.23 U.S. cents, the
weakest close in more than 5-1/2 years.
    Investors will be looking for any signs of concern about the
global economy in the Fed statement that is due after it
finishes its two-day meeting on Wednesday. The Fed has been
widely expected to raise rates sometime in mid-2015, but market
chatter has increasingly questioned the feasibility of such a
quick move.
    "The talk on a lot of desks now is, 'is the Fed really able
to continue along their desired path?'," Schruder said. 
    "Where central banks around the world are cutting rates,
taking a dovish stance on economics forecasts, can the Fed be
only entity carrying weight of the world? There's a lot of doubt
they can do that."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 15 Canadian
cents to yield 0.461 percent and the benchmark 10-year
 rising 53 Canadian cents to yield 1.392 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)