CANADA FX DEBT-C$ weakens as market braces for Fed meeting

Fri Sep 13, 2013 4:36pm EDT
 
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* C$ at C$1.0347 vs US$ or 96.65 U.S. cents
    * Fed seen cutting bond-buying by $10 billion next week
    * C$ seen heading back to C$1.04-1.05 range
    * Bond prices mixed


    By Andrea Hopkins
    TORONTO, Sept 13 (Reuters) - The Canadian dollar weakened
slightly against its U.S. counterpart on Friday as investors
positioned themselves ahead of a U.S. Federal Reserve meeting
next week at which the Fed is widely expected to scale back its
stimulus program modestly.
    Many traders and analysts expect the U.S. central bank to
announce a minor $10 billion reduction in its $85 billion
monthly bond-buying program, discouraged from taking bolder
action by last Friday's weaker than expected U.S. nonfarm
payrolls data. 
    "I think it's possible the Fed will do a nominal amount of
tapering, which would give a good signal to the market that the
process is beginning, slowly but surely," said John Curran,
senior vice president at CanadianForex. 
    He said the U.S. dollar will likely drift higher next week
as investors look ahead to the Fed meeting. The central bank
will release its policy statement on Wednesday, followed by a
news conference held by Chairman Ben Bernanke. 
    "I would expect the Canadian dollar to head back into the
C$1.04-C$1.05 range next week, barring any craziness from the
Fed," Curran said. 
    The Canadian dollar ended the North American
session at C$1.0347 to the U.S. dollar, or 96.65 U.S. cents,
weaker than Thursday's session close at C$1.0325, or 96.85 U.S.
cents.   
    Uncertainty surrounding the Fed was further fueled by a
Japanese newspaper report that said former U.S. Treasury
Secretary Lawrence Summers was tipped to replace Ben Bernanke as
the next Fed chief. 
    "The Nikkei article about Summers being the next Fed
chairmen lifted the (U.S.) dollar across the board," said Greg
Anderson, global head of foreign exchange strategy at BMO
Capital Markets in New York.
    "We're stuck until we get the Fed decision next Wednesday.
That could easily move us one to two big figures, depending on
the outcome. And I think everybody just wants to square up and
stay neutral heading into that event."
    Global equity market rose even though weak U.S. economic
reports kept many investors on edge, while gold posted its worst
week since June as concerns about a possible U.S. military 
strike on Syria eased. 
   U.S. Treasuries edged higher after weak consumer sentiment
and retail sales data bolstered the view that policymakers will
exit slowly from the Fed's stimulative bond-buying program. 
   U.S consumer confidence ebbed early this month and retail
sales advanced just slightly in August, figures on Friday
showed. 
    Prices for Canadian government bonds were mixed across the
maturity curve, with the two-year bond up half a
Canadian cent to yield 1.283 percent and the benchmark 10-year
bond rising 14 Canadian cents to yield 2.765
percent.