CANADA FX DEBT-Loonie strengthens as investors gauge Fed timetable

Mon Sep 23, 2013 4:58pm EDT
 
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* C$ at C$1.0285 against U.S. dollar
    * Fed in focus, Canadian retail sales on tap for Tuesday
    * Bond prices rise across the curve


    By Leah Schnurr
    TORONTO, Sept 23 (Reuters) - The Canadian dollar
strengthened against the greenback on Monday as investors
scrutinized policymakers' comments to gauge how long the U.S.
central bank will keep its economic stimulus program intact.
    Influential New York Fed President William Dudley defended
the Federal Reserve's decision last week not to reduce the
amount of bonds it buys each month, a move that surprised
markets that had been looking for a small cut.
    Dudley said that for now the Fed must push hard against
threats to U.S. economic recovery. Separately, Atlanta Fed
President Dennis Lockhart warned that America risked "losing its
economic mojo". 
    "The doves were flying today and we're seeing a reaction in
the Canadian dollar strength," said Scott Smith, senior market
analyst at Cambridge Mercantile Group in Calgary.
    As the market gets more insight from policymakers and U.S.
economic data, "it's going to be a pendulum swinging back and
forth between the taper-no taper trade," Smith said.  
    The Canadian dollar ended at C$1.0285 to the U.S.
dollar, or 97.23 U.S. cents, stronger than Friday's session
close of C$1.0299, or 97.10 U.S. cents. 
    A slew of Fed policymakers scheduled to speak throughout the
week will likely continue to hold investors' attention.
    Domestic economic data could set the tone for the Canadian
dollar on Tuesday with retail sales for July expected to rise,
reversing a drop the previous month.
    Still, the data is unlikely to be strong enough to change
the view the Canadian economy is slogging along, Smith said.
    "We're not seeing anything that suggests we're going to get
anything great in terms of economic numbers," he said. "The risk
tomorrow will probably be to the downside for the loonie." 
    Prices for Canadian government bonds were higher across the
maturity curve, with the two-year bond up 3-1/2
Canadian cents to yield 1.210 percent. The benchmark 10-year
bond rose 35 Canadian cents to yield 2.648 percent.