CANADA FX DEBT-C$ at 2-year low with central banks, U.S. data eyed

Mon Dec 2, 2013 9:44am EST
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* C$ at C$1.0637 vs US$, or 94.01 U.S. cents
    * Loonie at lowest since Oct. 2011, momentum to downside
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Dec 2 (Reuters) - The Canadian dollar fell to a
two-year low against the greenback on Monday, ahead of a Bank of
Canada meeting later in the week and as investors were watching
a slew of economic data south of the border for clues on the
future of U.S. monetary policy.
    The drop extended Friday's losses and added on to bearish
momentum after the loonie fell through key technical support
    The currency has suffered of late against a backdrop of a
less hawkish Bank of Canada, weaker oil prices and expectations
that the U.S. Federal Reserve will start to wind down its
economic stimulus.
    "None of those stories have gone away, they're all still 
here. You just have more people buying into it," said Greg
Moore, FX strategist at TD Securities in Toronto.
    The Canadian dollar was at C$1.0637 to the
greenback, or 94.01 U.S. cents, weaker than Friday's close of
C$1.0620 or 94.16 U.S. cents.
    The loonie traded as far as C$1.0655, its lowest level since
early October 2011. The low previously hit this year in July at
C$1.0609 had represented significant support for the currency,
which it first broke through on Friday.
    The C$1.06 level should act as fairly solid support in the
near-term unless the U.S. data disappoints, said Moore.
    The Bank of Canada will release its interest rate and policy
decision on Wednesday following its first meeting since a policy
shift in October when the central bank dropped any mention of a
rate hike.
    That change pushed out market expectations for the next rate
hike into 2015. Rates have been at 1 percent since 2010.
    Domestic data will be light this week until Friday's
Canadian labor market report.
     But south of the border, investors will get a number of
reports, including manufacturing activity, private payrolls,
consumer sentiment, third-quarter gross domestic product and the
closely-watched unemployment report. 
    The data could be key in calibrating market expectations for
when the Federal Reserve may start to wind down its economic
    Investors are trying to gauge whether the Fed will start to
reduce its amount of bond purchases at its next meeting later in
December or hold off until the new year.
    "Despite the Bank of Canada, perhaps the biggest driver for
U.S. dollar-Canadian dollar could still be U.S. data this week,"
said Moore. "For the Bank of Canada, I think it's pretty widely
expected to have a status quo-type message this week ... that
shouldn't mean much for U.S. dollar-Canadian dollar."
    The two-year bond dipped nearly 2 Canadian cents
to yield 1.106 percent, while the benchmark 10-year bond
 was down 27 Canadian cents to yield 2.590 percent.