CANADA FX DEBT-C$ flat vs USD after Fed, gains vs other majors

Tue Apr 3, 2012 4:51pm EDT
 
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* C$ ends at C$0.9904 vs US$, or $1.0097
    * Fed minutes signal QE3 on hold, boost US$
    * C$ gains against yen, euro
    * Bond prices lower across the curve

    By Jon Cook	
    TORONTO, April 3 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart, but rose versus most other
major currencies on Tuesday after the U.S. Federal Reserve
signaled it was less eager to launch additional monetary
stimulus measures.	
    Minutes released from the Fed's March policy meeting
suggested the appetite for another dose of stimulus via
quantitative easing, so-called QE3, has eased as the U.S.
economic recovery gains momentum. 	
    Market watchers were caught off guard by the Fed's change in
tone from late January when the central bank said it would keep
interest rates near zero until at least late 2014. Many
investors had believed more easing was likely.	
    "What you saw today was a major repricing in terms of (U.S.)
dollar versus all the other crosses," said Stewart Hall, senior
currency strategist at Royal Bank of Canada. "But if you look at
the Canadian dollar we're just slightly changed."	
    The Canadian dollar ended the North American
session at C$0.9904 against the U.S. dollar, or $1.0097, nearly
unchanged from Monday's close at C$0.9903 versus the greenback,
or $1.0098.	
    Canada did outperform most other major currencies, rising
against the yen, euro, sterling, Swiss franc and Mexican peso.	
    The improving American economy has helped boost the Canadian
currency this year, particularly as event risks in Europe have
subsided. The United States is the biggest destination for
Canadian exports.	
    "There is a very strong connection between what's going on
in the U.S. and arguably how Canada evolves economically and in
terms of (monetary) policy," said Hall.    	
    The Canadian dollar gained sharply on Monday after Bank of
Canada Governor Mark Carney said the Canadian economy is doing
better than expected and the threat from the European debt
crisis has lessened. 	
    The central banker also warned that businesses should not
rely on the Canadian dollar depreciating in value against the
U.S. currency to make exports more competitive	
    Carney's comments prompted some traders to price in higher
odds that the central bank will hike its key lending rate by the
end of the year. 	
    But the median forecast in a recent Reuters poll of primary
dealers shows they expect the first hike in the third quarter of
2013. [C A/POLL]	
    Canadian government bond prices were lower across the curve
on Tuesday, mimicking the drop in U.S. Treasuries that followed
the Fed minutes. But Canadian bonds outperformed their U.S.
peers. 	
    Canada's 2-year bond dipped 10 Canadian cents to
yield 1.258 percent, while the 10-year bond slipped
60 Canadian cents to yield 2.194 percent.