C$ tumbles to two-week low as Fed comments roil markets

Thu Jun 20, 2013 10:25am EDT
 
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* C$ at C$1.0360 vs US$, or 96.53 U.S. cents
    * Fed signals end to stimulus, roil global markets
    * Canada currency hurt less than other commodity currencies
    * Canadian bond yields hit 18-month highs

    By Alastair Sharp
    TORONTO, June 20 (Reuters) - The Canadian dollar lost almost
a cent versus the U.S. dollar in early trade on Thursday as the
greenback exhibited broad strength on the back of Federal
Reserve optimism about the U.S. economy and labor market.
    The Canadian dollar touched its weakest point in two weeks a
day after Fed Chairman Ben Bernanke said the U.S. central bank
could soon slow its bond-buying program and end it by the middle
of 2014. 
    "Bernanke certainly seemed to message, or at least set the
stage for QE ending in the next few months. That was enough for
the (U.S.) dollar to regain some of its losses," said Greg
Moore, a currency strategist at TD Securities, referring to a
return of U.S. dollar strength after several weeks of weakness.
    Yields on Canadian government debt jumped to 18-month highs,
following U.S. Treasuries higher as investors exited the safe
haven asset and seemingly moved en masse into the U.S. currency.
    Global stock markets slumped on the Fed news and as Chinese
data suggested growth there was waning, this in turn hit
commodity prices and the currencies of major resource
exporters. 
    The Australian and New Zealand dollars were particularly
hard hit, while the loonie was protected in part by its
proximity to the improving U.S. economy. The Aussie hit its
weakest against the loonie since September 2010. 
    "The Canadian dollar may suffer a little bit less than some
of its commodity currency cousins ... but nevertheless a
stronger U.S. economy, while it's good for the Canadian economy,
it's obviously better for the U.S. economy," TD's Moore said.
    At 9:35 a.m. (1335 GMT) the Canadian dollar was
trading at C$1.0360 to the greenback, or 96.53 U.S. cents,
compared with C$1.0273, or 97.34 U.S. cents, at Wednesday's
North American close.
    It was the currency's biggest one-day move lower in a month.
    The global selloff overshadowed news that household debt in
Canada, relative to income, fell for the second straight
quarter, data showed on Thursday. 
    The Bank of Canada has previously voiced concern about
consumer debt, but lately seems more confident this is now under
control. 
    The two-year bond was up 7 Canadian cents to
yield 1.203 percent, while the benchmark 10-year bond
 rose 42 Canadian cents to yield 2.304 percent, its
highest level since late in 2011.
    Domestic inflation and retail sales data is due out on
Friday.