CANADA FX DEBT-C$ claws back some value after six-month low

Wed Sep 24, 2014 4:51pm EDT
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* Canadian dollar ends at C$1.1057 or 90.44 U.S. cents
    * Breached psychological C$1.11/90 U.S. cent barriers in
    * Bond prices mostly lower across the maturity curve

 (Adds strategist comment; updates prices to close)
    By Alastair Sharp
    TORONTO, Sept 24 (Reuters) - The Canadian dollar made a
slight gain against its U.S. counterpart on Wednesday after
hitting its weakest level in six months, but further weakness is
expected as U.S. bond yields rise and Canada's central bank
takes a dovish tone.
    Weak commodity prices are adding to the lack of interest in
buying the loonie, as resource-rich Canada's currency is
colloquially known, strategists said.
    "U.S. yields are picking up and that does underpin a
stronger dollar/Canada" rate, or weaker Canadian dollar, said 
Greg Moore, a senior currency strategist at Royal Bank of
    Canadian bond prices were lower across the curve, meaning
yields rose, but the move was more distinct in U.S. Treasuries.
    Bank of Canada officials have noted this week that one-off
factors led to stronger inflation so far this year, and said the
economy can work at full capacity with stable inflation at a
lower rate than it has historically. 
    "In the absence of any strong economic results to come this
week, and that continued tone from the Bank of Canada, Canada
seems to be losing a little bit of ground," said Don Mikolich,
executive director for foreign exchange sales at CIBC World
Markets. "Weak commodity prices are also not helping at this
stage either."
    The Canadian dollar broke a three-session slide after
breaching C$1.11, or 90 U.S. cents, a key resistance level.
    The Canadian dollar ended the day changing hands
for C$1.1058 to the greenback, or 90.43 U.S. cents, stronger
than Tuesday's close at C$1.1069, or 90.34 U.S. cents.
    At one point in the session it hit C$1.1122, its weakest 
since March 26, and RBC's Moore said the currency could test
fresh 2014 levels above C$1.1279 in the next month. He sees it
at C$1.15 by year-end.
    Canadian government bond prices slipped, with the two-year
 down 4.5 Canadian cents to yield 1.145 percent and
the benchmark 10-year fell 26 Canadian cents to
yield 2.200 percent.

 (Additional reporting by Solarina Ho; Editing by Peter