CANADA FX DEBT-C$ dips; investors await Fed, Bank of Canada head

Wed Sep 18, 2013 9:44am EDT
 
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* C$ at C$1.0311 vs US$ or 96.98 U.S. cents
    * Canadian bond prices lower

    By Leah Schnurr
    TORONTO, Sept 18 (Reuters) - The Canadian weakened slightly
on Wednesday as investors were wary of placing aggressive bets
ahead of a widely expected announcement from the U.S. central
bank that it will begin scaling down its economic stimulus
program.
    Before the statement from the Federal Reserve due in the
afternoon, markets will be watching a speech from Bank of Canada
Governor Stephen Poloz, which is expected to focus on economic
growth in Canada. 
    Following that, focus will turn south of the border with
investors anticipating the Fed will begin slowly withdrawing its
asset purchase program. 
    The central bank is currently buying $85 billion in bonds a
month to prop up the economic recovery and most analysts expect
that will be reduced by a relatively small $10 billion.
    "The U.S. dollar has sold off fairly heavily over the past
two weeks, and pretty much all of that has to do with reduced
expectations on how much the Fed is going to pull back on the
asset purchase program," said Greg Moore, FX strategist at
Toronto-Dominion Bank.
    "Just given how far we've come since the beginning of the
month, the Fed would have to sound fairly dovish in order to
extend this move lower for dollar-Canadian dollar."
    The Canadian dollar was at C$1.0311 to the U.S.
dollar, or 96.98 U.S. cents, weaker than Tuesday's session close
of C$1.0295, or 97.13 U.S. cents. 
    The Fed announcement is expected at 2 p.m. EDT (1800 GMT),
followed by a press conference.
    Poloz is scheduled to give a speech in the morning on "the
preconditions for a return to natural growth for Canada."
    "They may be addressing the lack of rotation to
export-driven growth that they've been anticipating for quite
some time now," said Moore. "So there could be some potentially
Canadian dollar negative comments, especially if they're a
little bit more downbeat on their outlook."
    Prices for Canadian government bonds were lower across the
maturity curve, with the two-year bond down 3
Canadian cents to yield 1.278 percent, and the benchmark 10-year
bond down 20 Canadian cents to yield 2.798 percent.