CANADA FX DEBT-C$ resumes slide toward C$1.10 against US$

Fri Jan 17, 2014 9:52am EST
 
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* Canadian dollar at C$1.0958, or 91.26 U.S. cents
    * Divergent paths of Canada, U.S. widen gap between
currencies
    * Bond prices higher across the maturity curve

    By Alastair Sharp
    TORONTO, Jan 17 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, resuming a march toward
C$1.10 as the divergent paths of the two country's recent
economic data and monetary policy outlooks force investors to
reassess the loonie's value.
    The currency is on track to slip half a percent on the week
against the greenback and has failed to gain ground on other
major currencies after falling 2.5 percent last week and pushing
through what was considered a psychological support at C$1.09
after a grim jobs report. 
    Exacerbating the fall, Canada's central bank has taken a
more dovish tone amid a flurry of soft data points just as
robust data down south has emboldened the U.S. Federal Reserve
to turn more hawkish.
    "If I were a gambling man, I would think that today we might
see a run-up" into the C$1.1015 to C$1.1020 range, said Brad
Schruder, director of foreign exchange sales at BMO Capital
Markets.
    The Canadian dollar was at C$1.0958 to the
greenback, or 91.26 U.S. cents, weaker than Thursday's close of
C$1.0925, or 91.53 U.S. cents.
    Schruder said opinion on the likely direction of the
currency pair depended on whether an observer believes the level
of optimism about the U.S. economy and the pessimism about
Canada are justified.
    "The reality is it is too soon to tell," he said. "The
market has not found equilibrium in dollar/Canada, and as long
as it does not do that, the risk is higher, not lower." 
    The next chance for the market to assess the Bank of
Canada's gauge of the economy comes next Wednesday at its
policy-setting meeting. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2 Canadian cents
to yield 1.035 percent and the benchmark 10-year up
6 Canadian cents to yield 2.520 percent.