CANADA FX DEBT-C$ weaker on data, stimulus hopes

Thu Aug 23, 2012 3:52pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ at C$0.9936 vs $US, or $1.0064
    * Federal Reserve stimulus hopes dim
    * Bank of Canada's hawkish tone meets skepticism
    * Bond prices mixed

    By Solarina Ho
    TORONTO, Aug 23 (Reuters) - The Canadian dollar was weaker
against the U.S. dollar on Thursday, failing to gain traction as
the market continued to unwind recent gains amid a recent string
of weak domestic economic data and diminished hopes of swift
stimulus action in the U.S.
    Minutes from the Federal Reserve's August meeting suggested
another round of monetary stimulus may not be far off, but
comments on Thursday from St. Louis Federal Reserve President
James Bullard, who called the minutes "a bit stale", dampened
those expectations.    
    "It's a tough day for the Canadian dollar, but we saw a push
down to a three-month-high earlier in the week," said Adam
Button, currency analyst at ForexLive in Montreal.
    "It's abundantly clear the Canadian dollar doesn't have the
appetite to get below 98 cents," he added, also noting that the
currency has "almost been tick for tick with the S&P 500" over
the last month.
    U.S. stocks were lower on Thursday over the Fed's stimulus
expectations and data out of China and the euro zone, which
clouded the global economic outlook. 
    At 3:25 pm (1925 GMT) the Canadian dollar was
trading at C$0.9936 versus the U.S. dollar, or $1.0064, softer
than Wednesday's finish at C$0.9914, or $1.0087.
    Button said if the currency can push above the C$0.9950
level, it will likely test parity.
     Market skepticism that the Bank of Canada can really
deliver on its hawkish sentiment also kept the currency under
pressure. Bank of Canada Governor Mark Carney in remarks on
Wednesday repeated similar language used last month when keeping
rates unchanged, saying "some modest withdrawal of the present
considerable monetary policy stimulus" might become appropriate.
       
    "It seems kind of unbelievable that the Bank of Canada is
going to be raising rates anytime soon -- in fact I think the
market is pricing in only a 12 percent change of a move by year
end," said David Bradley, director of foreign exchange trading
at Scotiabank.
    "If you look at the last three or four economic indicators,
they've been quite soft -- retail sales, CPI, unemployment -- so
that is preventing further Canadian dollar strength as well."
    Canadian bond prices were mixed, with the two-year bond
 losing 3 Canadian cents to yield 1.125 percent and
the benchmark 10-year bond gaining 17 Canadian cents
to yield 1.821 percent.