CANADA FX DEBT-C$ pulls back from near parity with US$ after ECB

Thu Aug 2, 2012 9:36am EDT
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* C$ at C$1.0053 vs US$, or 99.47 U.S. cents
    * Currency soars to 99.98 U.S. cents
    * Then hits session low of C$1.0068 on ECB disappointment
    * Bonds higher across curve

    By Jennifer Kwan
    TORONTO, Aug 2 (Reuters) - Canada's dollar retreated after
soaring to near parity with the U.S. dollar on Thursday after
European Central Bank President Mario Draghi did not unveil any
concrete measures to deal with the euro zone debt crisis.
    Draghi heightened speculation of further bank purchases of
Italian and Spanish bonds when he said last week that he would
do "whatever it takes to preserve the euro."
    However, Draghi stopped short of providing concrete
measures. Instead, he said the ECB will draw up a mechanism in
the coming weeks to make outright purchases to stabilize
stressed euro zone borrowing costs. 
    "It seems the ECB was caught off guard by the aggressive
rhetoric from Draghi last week," said Dean Popplewell, chief
currency strategist at OANDA.
    "Draghi came out of the gate swinging. Once the market
realized there was no firm action and that this is still a work
in progress ... risk-off was again applied rather quickly."
    The Canadian dollar soared to a session high
C$1.0002, or 99.98 U.S. cents, as Draghi began a press
conference but then quickly hit the lowest levels of the session
at C$1.0068.
    At 9:10 a.m. (1310 GMT), the Canadian dollar was at
C$1.0053 against the greenback, or 99.47 U.S. cents, virtually
flat from Wednesday's North American finish at C$1.0052, or
99.48 U.S. cents.
    "We expect that by September the ECB will be in a better
position to announce the details," said Avery Shenfeld, chief
economist at CIBC World Markets.
    The disappointment follows a statement by the Federal
Reserve on Wednesday. The U.S. central bank said the economy was
weaker but left policy on hold, and investors shifted their
focus to the European Central Bank.
    The Fed stopped short of offering new monetary stimulus even
as it signaled further bond buys could be in store, sending
riskier assets like stocks and some metals prices like copper
    Elsewhere on Thursday, data also showed the number of
Americans filing new claims for jobless benefits rose less than
expected last week. 
    Canadian bond prices were higher across the curve with the
two-year bond up by 5 Canadian cents to yield 1.065
percent, and the benchmark 10-year bond climbed 25
Canadian cents to yield 1.684 percent.