CANADA FX DEBT-C$ steady; eyes on Bank of Canada rate decision

Tue Sep 3, 2013 4:56pm EDT
 
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* C$ at $1.0530 vs US$, or 94.97 U.S. cents
    * Higher oil prices, solid Chinese data help currency
    * Bond prices lower across maturity curve

    By Solarina Ho and Alastair Sharp
    TORONTO, Sept 3 (Reuters) - The commodities-linked Canadian
dollar ended little changed against its U.S. counterpart on
Tuesday, underpinned by firmer oil prices and positive Chinese
economic data as investors awaited a Bank of Canada rate
decision and key jobs data. 
    The Canadian dollar held steady against the greenback as the
U.S. dollar rose on other currencies, helped by surprisingly
strong economic data that boosted expectations the U.S. Federal
Reserve will start scaling back its stimulative asset purchases.
    Prices for crude, a key Canadian export, nudged higher after
an Israeli missile test caused jitters among investors already
anxious about the conflict in Syria. The test underscored
concerns about supply disruption in the Middle East. 
    The currency was also helped by upbeat Chinese data over the
weekend, which showed factory activity expanded last month at
the fastest pace in more than a year, raising hopes the slowdown
in the world's second-largest economy may be stabilizing.
 
    "Some of the flow is still being driven by, for instance,
the positive Chinese PMI over Sunday night," said Greg Moore,
foreign exchange strategist at TD Securities.
    Currency traders will look for policy signals from the Bank
of Canada when it sets its key rate on Wednesday, while both
U.S. and Canadian employment data is due on Friday.
    While the Bank of Canada's decision will be closely watched,
no rate change is expected and the tone of its discussion is
likely to be consistent with its recent stance. 
    "The concerns now are really around the payroll data this
week, where people are expecting a little bit better numbers in
Canada," Darcy Browne, managing director of capital markets
trading at CIBC World Markets. "We may get a chance to buy U.S.
dollars a little bit cheaper again before the week's over." 
    The Canadian dollar ended the session trading at
C$1.0530 versus the U.S. dollar, or 94.97 U.S. cents, firmer
than Monday's close of C$1.0542, or 94.86 U.S. cents, and
unchanged from the Bank of Canada's last official close on
Friday.
    North American markets were closed on Monday for the Labor
Day holiday.
    The currency should trade between C$1.0480 and C$1.570 in
the near term, TD's Moore said.
    The North American jobs data on Friday and general risk
sentiment, which will be determined by developments in Syria,
will be two key drivers for the market.
    Prices for Canadian government debt were lower across the
curve, with the two-year bond off 6 Canadian cents to
yield 1.224 percent and the benchmark 10-year bond 
down 55 Canadian cents to yield 2.688 percent.