CANADA FX DEBT-C$ weakens with commodity prices in wake of Fed

Wed Apr 4, 2012 5:09pm EDT
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* C$ ends at C$0.9964 vs US$, or $1.0036
    * U.S. ADP data, Fed outlook boost US$
    * Oil, gold, other commodities tumble
    * Bond prices higher across curve
    * Reuters poll sees C$ near parity for next year

    By Jon Cook	
    TORONTO, April 4 (Reuters) - The Canadian dollar slid
against the greenback on Wednesday, hurt by a decline in global
commodity prices a day after U.S. central bank meeting minutes
dented hopes for more economic stimulus, and as a Spanish debt
auction drew weak results.	
    The U.S. central bank's minutes from its March meeting,
released Tuesday, suggested the appetite for a third dose of
quantitative easing, so-called QE3, has decreased as the
American recovery firms. 	
    Investors were also reminded of the risks from Europe as
Spain sold 2.6 billion euros of government bonds, toward the
lower end of its target range and at higher yields than at
previous auctions. 	
    The Canadian dollar was little changed on Tuesday, but
dropped Wednesday along with a sharp decline in commodities and
equity markets.	
    "The Fed announcement has obviously shaken up the market a
lot," said Darren Richardson, senior corporate dealer at
CanadianForex, a commercial foreign exchange dealing firm.	
    "We saw some money flows yesterday afternoon that was
maintaining Canadian dollar strength, but once that had come
through we saw the lo onie f ollow the rest of the commodity
currencies and take a tumble against the U.S. dollar," he added.	
    The Canadian dollar finished at C$0.9964 versus the
U.S. currency, or $1.0036, down from Tuesday's close at C$0.9904
against the U.S. dollar, or $1.0097.	
    The U.S. dollar firmed further after data on Wednesday
showed U.S. private employers added 209,000 jobs in March,
suggesting the labor market is strengthening. Job gains for
January and February were also revised up to 182,000 and
230,000, respectively. 	
    The improving American economy has helped boost the Canadian
currency this year, particularly as event risks in Europe have
subsided. But on Wednesday the greenback was firming against all
other major currencies.	
    "The Canadian dollar is actually depreciating less than many
other currencies compared to the U.S. dollar," noted Charles
St-Arnaud, Canadian economist and currency strategist at Nomura
Securities International in New York.	
    Canada's dollar outperformed the euro, Swiss franc and
Australian and New Zealand dollars.	
    The sharp move higher by the U.S. currency hurt commodities,
which are priced in U.S. dollars. Oil fell about 2 percent and
gold slid to a three-month low.  	
    The Canadian dollar has gained more than 2 percent this year
against the U.S. currency.	
    Separately, a Reuters poll released on Wednesday showed the
Canadian dollar at exactly $1.00 in one, three and six months
from now. In a year, the currency is expected to strengthen
slightly to C$0.988 versus the U.S. dollar. 	
    "The Canadian economy should mildly outpace the recovery in
the U.S., which would keep the Canadian dollar stronger than the
U.S. (dollar)," said David Bradley, a director of foreign
exchange trading at Scotia Capital.	
    Canadian government bond prices were higher across the
curve, mimicking the rise in U.S. Treasuries that followed the
employment data and Fed minutes. 	
    Canada's 2-year bond was up 8 Canadian cents to
yield 1.218 percent, while the 10-year bond rose 61
Canadian cents to yield 2.127 percent.