CANADA FX DEBT-C$ eases ahead of Fed statement

Wed Jan 28, 2015 9:52am EST
 
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* Canadian dollar at C$1.2435 or 80.42 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Jan 28 (Reuters) - The Canadian dollar was weaker
against the greenback on Wednesday as oil prices retreated and
as investors looked ahead to a U.S. Federal Reserve policy
statement later in the day.
    The U.S. dollar recouped some of the previous session's
losses, climbing against a basket of currencies, but gains were
tempered as investors speculated the Fed could take a more
dovish stance on raising interest rates.
    The U.S. central bank's Federal Open Market Committee (FOMC)
is scheduled to release its statement at the end of a two-day
meeting on Wednesday. It has been widely expected to start
raising rates by around midyear, even as central banks globally
have loosened monetary policy to spur sluggish growth.
    "Certainly we've had a divergence globally," said Scotiabank
chief currency strategist Camilla Sutton, adding that markets
will be looking out for the use of the words "patience" and
"considerable time" in the Fed's language, which might signal it
is in no rush to hike rates.
    "The combination of having disinflationary pressure building
as well as a shift in the voting members of the FOMC board to a
slightly more dovish bias have all played into market
psychology, but all in all, we're likely to see no major shift
in policy stance from the Fed."
    At 9:26 a.m. (1426 GMT), the Canadian dollar was at
C$1.2435 to the greenback, or 80.42 U.S. cents, softer than
Tuesday's close of C$1.2404, or 80.62 U.S. cents.
    The currency has stabilized somewhat after last week's hefty
losses, though analysts agree that the overall trend of a weaker
Canadian dollar remains firmly entrenched.
    Canada is a major oil producer and crude prices have been a
key driver of the loonie in recent months. They slipped on
Wednesday following an industry report that said U.S. crude
stocks had the biggest rise on record last week. 
    Canadian government bond prices were mixed across the
maturity curve, with some of the longest-term maturities lower.
The two-year was up 4 Canadian cents to yield 0.477
percent, while the benchmark 10-year slipped 5
Canadian cents to yield 1.435 percent.

 (Editing by Peter Galloway)