CANADA FX DEBT-C$ pulls back from near two-month high

Wed Apr 9, 2014 9:49am EDT
 
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* Canadian dollar at C$1.0937 or 91.43 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, April 9 (Reuters) - The Canadian dollar weakened
against the greenback on Wednesday, pulling back from a near
two-month high overnight as investors consolidated recent gains.
    Still, the decline was modest as risk appetite continued to
sharpen, helped by Greece's announcement that it would return to
debt markets. The benchmark five-year bond will be the first
long-term debt sale for Greece since its international bailout
started four years ago. The country has been bailed out twice by
the European Union and the International Monetary Fund.
 
    Since hitting a 4-1/2 year low in late March, the Canadian
dollar has rebounded by about 3 percent. Stronger-than-expected
economic data recently has helped improve sentiment for the
loonie. 
    "Obviously the currency had weakened quite dramatically
through the end of last year and into early 2014, so some of the
positioning I think was perhaps just a little bit stretched,"
said David Tulk, chief Canada macro strategist at TD Securities
in Toronto.
   With a light economic calendar in the coming days, attention
was turning to the Bank of Canada's upcoming policy announcement
next Wednesday. The central bank's more dovish stance has been a
major driver of the currency in recent months and investors will
be watching to see if the bank alters its tone.
    While strength in Canadian data has given the loonie a bit
of a lift recently, the next major move in the U.S.
dollar-Canadian dollar pairing will come down to how the U.S.
dollar performs, Tulk said.
    "When it comes down to it, I think we'll have to wait for
the stronger U.S. dollar story to reassert itself once the data
in the U.S. begins to improve over the next couple months. That
will get us back to the story of weakness in the Canadian
dollar, which is core to our own view."
    The Canadian dollar was at C$1.0937 to the
greenback, or 91.43 U.S. cents, weaker than Tuesday's close of
C$1.0922, or 91.56 U.S. cents.
    The currency rose as high as C$1.0912 overnight, matching
the previous day's peak, which is the highest level since
mid-February.
    There is no domestic economic data on the docket on
Wednesday but investors will get the minutes from the U.S.
Federal Reserve's last policy meeting later in the day.
    Canadian government bond prices were lower across the
maturity curve, with the two-year off 1.8 Canadian
cents to yield 1.092 percent and the benchmark 10-year
 down 19 Canadian cents to yield 2.483 percent.

 (Editing by Peter Galloway)