CANADA FX DEBT-C$ firms on ECB talk; eyes on Bernanke, Canada GDP

Fri Aug 31, 2012 8:08am EDT
 
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* C$ firms to C$0.9901 vs US$ or $1.01
    * Bond prices fall across the curve
    * Markets await Bernanke, Canada GDP

    By Claire Sibonney
    TORONTO, Aug 31 (Reuters) - The Canadian dollar ticked up
against the U.S. dollar on Friday after a European Central Bank
executive board member strengthened market expectations the ECB
will intervene in the bond market to help tackle the region's
three-year-old debt crisis.
    Benoit Coeure said ECB bond purchases in the sovereign debt
market must be subject to strict conditionality, raising bets
the ECB will buy Spanish and Italian government bonds to reduce
their high borrowing costs. 
    "That's nothing new but that caused the euro to rally ...
and put pressure on (U.S.) dollar/Canada to move lower," said
David Bradley, director of foreign exchange trading at
Scotiabank.
    "But (U.S.) dollar/Canada has been stuck in this
C$0.9850-C$0.9950 range for the last couple weeks and it's
certainly run into good resistance over the last couple days."
    Meanwhile, markets were also braced for a speech by U.S.
Federal Reserve Chairman Ben Bernanke that could offer clues on
the central bank's next policy steps.
    Riskier assets were largely recovering from modest falls
this week ahead of Bernanke's address to the annual Jackson Hole
meeting of central bankers, with few in the market expecting the
Fed chief to signal anything major, such as a third round of
quantitative easing or bond buying. 
    Investors were also awaiting domestic second-quarter growth
data, expected to show Canada's economy likely grew at a
disappointing pace for the third straight time, expanding at a
slower rate than the Bank of Canada expects. 
   At 7:50 a.m. (1150 GMT), the Canadian dollar stood at
C$0.9901, or $1.01, firmer than Thursday's North American
session close at C$0.9923 versus the greenback, or $1.0078.
    Bradley noted that month-end flows might should also see
more U.S. dollar buying, but that had yet to materialize so far
on Friday.
    Canadian bond prices eased across the curve on Friday, with
the two-year bond down 5 Canadian cents to yield
1.150 percent and the benchmark 10-year bond down 27
Canadian cents to yield 1.799 percent.