CANADA FX DEBT-C$ hits 4-mth low as commodity, rate outlooks weigh

Wed Nov 27, 2013 8:54am EST
 
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By Alastair Sharp
    TORONTO, Nov 27 (Reuters) - The Canadian dollar weakened to
a four-month low versus its U.S. counterpart on Wednesday, as
investors shied away from the commodity-linked currency due to a
drab outlook for resources.
    A Goldman Sachs note out on Tuesday suggested the Canadian
dollar could fall to C$1.14 a year from now, as commodity prices
are likely to sag.
    Coupling that with a retreat in the Bank of Canada's hawkish
tilt and a broad expectation that the U.S. Federal Reserve will
move to taper its monetary stimulus soon has cut more than 2.5
percent off the relative value of Canada's currency since late
October.
    "The market's moving to a point where they think the growth
and interest rate differential will probably favor the United
States going forward versus us," said Darcy Browne, managing
director of foreign exchange sales at CIBC World Markets.
    At 8:21 a.m. (1321 GMT) the Canadian dollar was
trading at C$1.0570 to the greenback, or 94.61 U.S. cents,
compared with C$1.0530, or 94.97 U.S. cents, at Tuesday's North
American close.
    "Commodity prices have not really done anything to help the
Canadian dollar, which is after all a growth currency," Browne
said. "In a world where there is a lack of growth outside of
possibly China, when you look at the big picture it's not
surprising that the Canadian dollar should back up."
    Browne said he expected the loonie, as Canada's currency is
colloquially known, to trade between C$1.0550 and C$1.0610
during the session, with the U.S. Thanksgiving holiday on
Thursday likely to cap price action and volume.
    The two-year bond was up 1 Canadian cent to yield
1.093 percent, while the benchmark 10-year bond fell
7 Canadian cents to yield 2.533 percent.