CANADA FX DEBT-C$ flat as Europe concerns offset BoC
* C$ at C$0.9913 vs US$, or $1.0088 * Europe offsets Bank of Canada's rosier view * Bonds flat to softer across curve By Jennifer Kwan TORONTO, April 19 (Reuters) - Canada's dollar was little changed against its U.S. counterpart on Thursday as worries about Spain's ability to deal with its ballooning deficit kept the risk-linked currency under pressure after recent gains. Solid demand at Spain's bond sale on Thursday briefly lifted the euro and European shares, but the gains were curbed due to broader concerns about the financial stability of the euro zone. France and Spain sold all the bonds they wanted at auction on Thursday, though for Spain the cost was higher yields, indicating growing concerns the government will not be able to tame its deficit. European concerns are over-shadowing a "decent" domestic story, said Shane Enright, an executive director of foreign exchange sales at CIBC World Markets. The Bank of Canada kept interest rates unchanged at 1 percent on Tuesday, as expected, but signaled that it was starting to think more seriously about tightening monetary policy. The surprisingly hawkish stance by the central prompted several of the country's primary dealers to pull forward their forecasts for an interest rate hike, according to a Reuters poll, with the central bank now expected to tighten policy early next year. "The domestic story is pretty decent. The Bank of Canada made that clear this week," said Enright. "But you still have a lot of issues in Europe. The euro is still on the heavy side. Commodity prices have struggled to rebound, equity markets are a little shaky so all of those factors are offsetting what's a decent domestic story." Indeed in Wednesday's Monetary Policy Report (MPR), a quarterly report outlining the Bank of Canada's base-case projection for Canadian inflation and growth, the bank raised its growth forecasts for the first three quarters of 2012, but warned that Canadian household debt levels would rise further. Bank Governor Mark Carney also said the euro zone debt crisis was "still the biggest downside risk, external downside risk" to the Canadian economy. At around 8:15 a.m. (1215 GMT), the Canadian dollar ended at C$0.9913 against the U.S. dollar, or $1.0088, unchanged from Wednesday's finish at C$0.9913 against the U.S. dollar, or $1.0088. Oil and gold prices were also mixed, keeping the currency flat. With little economic data in Canada, traders would look to U.S. jobs and a manufacturing reading for further guidance. Canadian government bond prices were flat to softer. The two-year bond was unchanged to yield 1.323 percent. The benchmark 10-year bond shed 7 Canadian cents to yield 2.052 percent.
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