CANADA FX DEBT-C$ edges up on Europe; market eyes BoC

Tue Apr 17, 2012 8:14am EDT
 
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* C$ at C$0.9964 vs US$, or $1.0036
    * Market awaits Bank of Canada rate announcement
    * Bonds retreat across the curve

    By Jennifer Kwan	
    TORONTO, April 17 (Reuters) - Canada's dollar was slightly
higher against its U.S. counterpart on Tuesday, lifted by
improving investor sentiment about Europe's economy, while
investors awaited the Bank of Canada's rate announcement due
later in the morning. 	
    The currency tracked the broader trend in global equities,
which got a boost from a Spanish debt sale that went smoothly
and German data that provided an upbeat reading of the euro
zone's largest economy. Both events gave investors some relief
about the region's debt crisis. 	
    But markets in Canada will be squarely focused on the
central bank interest rate announcement and accompanying
statement. 	
    The Bank of Canada looks set to keep interest rates steady
at 1 percent, but will likely keep with the more hawkish tone it
has adopted in the past month and may even add an explicit
mention of eventual rate increases. 	
    The central bank has frozen its overnight lending target at
the extremely low level for 19 months and is seen standing pat
until the second quarter of 2013, according to the median
forecast in a Reuters poll of 40 analysts. 	
    "We're not expecting any moves on interest rates, but the
focus will be on the tone of the statement," said Matt Perrier,
a director of foreign exchange sales at BMO Capital Markets.	
    "We've certainly seen (Governor Mark) Carney be a little
more upbeat and I guess slightly more hawkish than he has been.
To the extent that the statement has a hawkish tone to it you
could see the Canadian dollar appreciate a little bit further."	
    At around 7:50 a.m. (1150 GMT), the Canadian dollar 
was at C$0.9964 versus the U.S. dollar, or $1.0036, slightly
higher than its North American finish on Monday at C$0.9997
versus the U.S. dollar, or $1.0003.	
    Perrier said the Canadian currency could see short-term
resistance at C$0.9925-35 against the greenback, but that the
broader trading range is between C$0.9850-C$1.0050.	
    Firmer U.S. stock futures, oil and metals prices also
supported the Canadian currency's move higher. The market is
also eyeing domestic manufacturing sales data.	
    Canadian government bond prices sank across the curve, with
Canada's two-year bond down 4 Canadian cents to yield
1.255 percent. The 10-year bond retreated 19
Canadian cents to yield 2.036 percent.