CANADA FX DEBT-C$ firms on global data as Bank of Canada holds rates

Wed Sep 4, 2013 12:09pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ at C$1.0483 vs US$, or 95.39 U.S. cents
    * Bank of Canada holds benchmark rate at 1 pct
    * Bank says global economic uncertainty hampers growth
    * Poll shows C$ expected to weaken slightly in coming months

    By Solarina Ho
    TORONTO, Sept 4 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Wednesday as it played catch-up
with a rally in other commodity-linked currencies on upbeat
economic data, and after the market digested a no-surprise
policy statement from the Bank of Canada. 
    The central bank maintained its overnight target rate at 1
percent, as expected, and upheld its vague rate-hike bias with
language identical to its July policy announcement, but said
that Canada's economic revival was taking longer than
expected. 
    "No one was looking for a change in the overnight rate,
obviously, and they kept the forward-looking language entirely
intact," said Andrew Kelvin, senior fixed income strategist at
TD Securities. "On the margins, it was a bit on the dovish side,
but really it's steady as she goes."
    The bank did note that uncertain global economic conditions
were hampering Canadian export growth and business investment.
The bank is expected to keep interest rates at current levels
until the fourth quarter of 2014, according to a Reuters poll of
35 economists last week. 
    The Canadian dollar was trading at C$1.0483 versus
the U.S. dollar, or 95.39 U.S. cents, at around 11:33 a.m. (1533
GMT). That was firmer than its level immediately before the
bank's statement and also up from Tuesday's North American
finish of C$1.0530, or 94.97 U.S. cents.
    "Leading into the Bank of Canada, there was uncertainty as
to what their statement might contain. And that held the
Canadian dollar back from appreciating to the extent that it
otherwise would have," said Camilla Sutton, chief currency
strategist at Scotiabank.
    The Canadian dollar, which is expected to weaken slightly in
the coming months according to a Reuters poll released on
Wednesday, was outperforming all but its
commodities-linked sister currencies, the Australian 
and New Zealand dollars.
    A string of more positive global economic data so far this
week, including a better-than-expected Australian economic
growth report, have given growth-sensitive currencies a boost,
and the Canadian dollar has benefited from that, Sutton said.
  
    "They're very, very strong. After the Bank of Canada
statement, which I think was fairly neutral to the Canadian
dollar, that just allowed Canada to play catch-up with the
uncertainty out of the way," she said.
    Prices for Canadian government debt were mixed across the
maturity curve, with the two-year bond rising half a
Canadian cent to yield 1.220 percent and the benchmark 10-year
bond off 3 Canadian cents to yield 2.688 percent.