CANADA FX DEBT-C$ eyes parity on central bank hopes, GDP

Tue Jul 31, 2012 8:15am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ touches high of C$1.0003 vs US$ or 99.97 U.S. cents
    * Bond prices climb across the curve
    * Canadian GDP due at 8:30 a.m.

    By Claire Sibonney
    TORONTO, July 31 (Reuters) - Canada's dollar nearly cracked
parity against its U.S. counterpart on Tuesday, but then pulled
back from an 11-week high as investors feared a recent rally
built on hopes of new stimulus from central banks in the United
States and Europe had been overdone.
    Riskier assets have been boosted by mounting expectation
that the European Central Bank will revive its bond buying
program to help lower the borrowing costs of debt-stricken Spain
and Italy, while the U.S. Federal Reserve has been under renewed
pressure to support flagging growth.
    Both central banks hold policy meetings this week. 
    Last week, ECB President Mario Draghi said the ECB was ready
to do whatever it takes to preserve the euro. 
    "Draghi especially ... has put his personal credibility on
the line which is something that's extraordinarily rare in
central banking," said Adam Button, currency analyst at
ForexLive in Montreal.
    "The market is now alight with speculation about some of the
fantastic things they might do and that goes for the Fed as
well, to some lesser extent, so right now we're going to witness
the full power of central banking."
    At 8:08 a.m. (1208 GMT), the Canadian dollar stood
at C$1.0023 versus the greenback, or 99.77 U.S. cents, slightly
softer than Monday's North American session close at C$1.0018
against the greenback, or 99.82 U.S. cents.
    Earlier the Canadian currency touched C$1.0003, or 99.97
U.S. cents, its firmest level since mid-May.
    Domestic growth data for May is due at 8:30 a.m. (1230 GMT))
and is expected to provide further direction.
    "If we get a very strong (GDP) report the Canadian dollar
can bust right through parity," added Button, noting some
resistance for the domestic currency around C$0.9955.
    Canadian bond prices climbed across the curve with the
two-year bond up 2 Canadian cents to yield 1.080
percent, and the benchmark 10-year bond up 19
Canadian cents to yield 1.680 percent.