CANADA FX DEBT-C$ starts 4th quarter firmer, but not expected to last

Wed Oct 1, 2014 4:25pm EDT
 
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* Canadian dollar at C$1.1172 or 89.51 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, Oct 1 (Reuters) - The Canadian dollar firmed
against the greenback on Wednesday for the first time in five
sessions as it recovered from a more than six-month low hit
overnight, though analysts still expect there is more weakness
in store for the loonie. 
    The currency came into the first trading day of the fourth
quarter sporting a loss of 4.7 percent over the span of the last
three months, making for its worst quarter in three years.
    While the Canadian dollar has had a number of factors
working against it, the main driver of its fall continues to be
the rally in the greenback as the U.S. economy picks up and the
U.S. Federal Reserve moves closer to raising interest rates.
    The loonie got a reprieve from that trend on Wednesday as
mixed U.S. economic reports sapped strength from the greenback,
said Mark Chandler, head of Canadian fixed income and currency
strategy at Royal Bank of Canada in Toronto. 
    "The thought is that if the U.S. dollar does at least stop
appreciating, maybe it will take the pressure off commodity
prices as well," said Chandler.
    But the day's gains likely only amount to a short-term
breather, with RBC still expecting the currency pair to be at
C$1.15 by the end of the year, he said.
    The Canadian dollar ended the session at C$1.1172
to the greenback, or 89.51 U.S. cents, stronger than Tuesday's
close of C$1.12, or 89.29 U.S. cents. It hit a session low of
C$1.1223 in overnight trade, its lowest level since late March.
    Having breached resistance at C$1.12 on Tuesday, analysts
say focus is turning to whether the loonie will revisit 2014's
low of C$1.1279, set in March.
    "Everyone is looking for that as a level that will either
provide some resistance or a level that once we're through,
really opens up another leg higher" for the U.S. dollar against
the loonie, said Camilla Sutton, chief currency strategist at
Scotiabank in Toronto.
    The market has little in the way of domestic factors to
trade off, with the economic calendar light until Friday's trade
balance data for August. The U.S. unemployment report, also due
Friday, likewise will be closely watched.
    While a strong jobs report would support the U.S. dollar
continuing to move higher, a disappointing report would make it
difficult for traders to look past two weak labor reports in a
row, Sutton said.
    The previous U.S. jobs report showed employers hired the
fewest number of workers in eight months in August. Canada will
not release its September jobs report until the following week.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 4 Canadian cents
to yield 1.102 percent and the benchmark 10-year up
59 Canadian cents to yield 2.078 percent.

 (Editing by Meredith Mazzilli)