CANADA FX DEBT-C$ touches 6-mth low; Fed hopes drive U.S. dollar run

Thu Sep 25, 2014 4:48pm EDT
 
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* Canadian dollar at C$1.1108 or 90.03 U.S. cents
    * Bond prices rise across the maturity curve

    By Solarina Ho
    TORONTO, Sept 25 (Reuters) - The Canadian dollar slid to its
weakest level in six months against its U.S. counterpart on
Thursday, as the greenback powered higher on expectations that
the Federal Reserve will likely end its bond-buying next month
and begin raising the cost of borrowing next year.
    The U.S. dollar's winning streak, on track to be the longest
since the early 1970s, comes as the Canadian dollar faces
pressure at home, in particular, a series of dovish comments
from the Bank of Canada.
    "Fresh lows in the Canadian dollar has been a long time
coming. The U.S. dollar is an unstoppable machine at the
moment," said Adam Button, a currency analyst at ForexLive, who
said there was a tremendous amount of U.S. dollar demand as the
market bet the Fed will hike interest rates, in contrast to
Europe's monetary policy stance.
    The Canadian dollar finished Thursday's session at
C$1.1108 to the U.S. dollar, or 90.03 U.S. cents, about a half
cent weaker than Wednesday's close of C$1.1057, or 90.44 U.S.
cents. It touched C$1.1128 during the session, it's softest
level since late March.
    "In the context of what we're seeing in terms of some other
currencies against the U.S. dollar, you can argue that it's
actually holding in comparatively well," said Jeremy Stretch,
head of foreign exchange strategy in London with CIBC World
Markets.
    Stretch noted that the greenback was nonetheless susceptible
to some profit-taking as the end of the month and quarter
approaches.
    ForexLive's Button also said a report that Chinese central
bank Governor Zhou Xiaochuan, an advocate of pro-market
financial reforms, may lose his job in a reshuffling that
follows internal battles over overhauling the economy, is also
creating uncertainty in the market and hurting the Canadian
dollar. 
    "The bottom line is, the market doesn't have handle on
what's happening of China, but there's a sense that change is
coming," Button said. "And uncertainty is the enemy of a
currency like the Canadian dollar and that's reflected in the
six month low today."
    Canadian government bond prices were higher across the
maturity curve, with the two-year rising 4.7 Canadian
cents to yield 1.120 percent and the benchmark 10-year
 adding 42 Canadian cents to yield 2.152 percent.

 (Reporting by Solarina Ho; Editing by Meredith Mazzilli and
Andrew Hay)