CANADA FX DEBT-C$ slips as US$ firms on ECB comments

Thu Mar 5, 2015 10:02am EST
 
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* Canadian dollar at C$1.2466, or 80.22 U.S. cents
    * Bond prices mostly higher across the maturity curve

    By Solarina Ho
    TORONTO, March 5 (Reuters) - The Canadian dollar retreated
on Thursday against the greenback, which strengthened following
comments by the European Central Bank that underscored the
strength of the U.S. economy compared with those of other
countries.
     The European Central Bank raised its economic growth
forecasts on Thursday but cut its inflation projection for 2015
to zero, reflecting the impact of last year's sharp drop in oil
prices and euro weakness.
    The loonie had strengthened sharply in the previous session
after the Bank of Canada kept interest rates steady and
indicated that it was happy with how the market and the economy
reacted to its surprise 25 basis point interest rate cut in
January.
    "The broader U.S. dollar impetus, certainly after the
initial comments from the ECB, are certainly putting a topside
spin on USD/CAD," said Jeremy Stretch, head of foreign exchange
strategy with CIBC World Markets in London.
    "It does suggest that even if the Bank of Canada is slightly
more reticent of ... more monetary easing, I think it's still a
case of still looking to buy the dips on USD/CAD."
    At 9:31 a.m. (1431 GMT), the Canadian dollar was at
C$1.2466 to the greenback, or 80.22 U.S. cents, weaker than
Wednesday's close of C$1.2416, or 80.54 U.S. cents.
    Most currency strategists are still forecasting a weaker
Canadian dollar because of expectations of low oil prices in the
months ahead, according to a Reuters poll this week.
Oil is a key Canadian export.  
    Stretch said the trajectory of the USD/CAD moves might be a
little slower without the uncertainty surrounding the Bank of
Canada and more reliant on crude prices and expectations for the
timing of the U.S. Federal Reserve's next rate hike.
    Markets will be eyeing comments later on Thursday from
Federal Reserve Bank of San Francisco President John Williams
and U.S. employment data for February on Friday for further
direction. In Canada, data for the country's trade balance in
January will also be in focus on Friday.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year down 2 Canadian
cents to yield 0.615 percent and the benchmark 10-year
 was off 10 Canadian cents to yield 1.516 percent.

 (Reporting by Solarina Ho; Editing by Lisa Von Ahn)