CANADA FX DEBT-C$ in a muted range after global factory data

Wed Jun 1, 2011 8:36am EDT
 
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 * C$ edges up to C$0.9683 to the U.S. dollar, or $1.0327
 * Trade is choppy in small C$0.9667-C$0.9698 range
 * Bonds little changed
 TORONTO, June 1 (Reuters) - Canada's dollar held in a muted
trading range against the U.S. currency on Wednesday morning as
market players reacted to weakening factory data in Europe and
Asia.
 The surveys for May on Wednesday fed concerns that the
world's main economic engines are cooling fast as richer
countries curtail orders.  [ID:nLDE7500VU]
 Trading between C$0.9667-C$0.9698 in early dealings, the
currency is expected to see further consolidation ahead of
Friday's U.S. non-farm payrolls report for May, analysts said.
 "The price action in dollar/Canada was a minimum range of
30-points, but a fair bit of choppiness and volatility in
recognition of the data beats and misses elsewhere," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial.
 Purchasing managers indexes, measuring the activities of
thousands of factories across the world, sank to multi-month
lows in China and Europe, where even regional pacesetters
France and Germany showed fresh signs of sagging.
 Investors were also assessing the landscape a day after the
currency zoomed to its highest level in more than a week on the
back of a central bank statement that was more hawkish than
expected. [ID:nN31112740]
 The move finally pushed the currency out of its tight
C$0.9735-C$0.9817 range recently, and Spitz said C$0.9650, the
50-day moving average, now represented initial decent support.
 Canadian government bonds were little changed, taking a
breather after a steep sell-off in the previous session on
changing expectations on the outlook for Canadian interest
rates.
 Overnight index swaps, which trade based on expectations
for the central bank interest rate, now show investors have
increased the odds of monetary policy tightening in September,
October and December. July 19, the next policy setting date, is
seen as a remote possibility for the central bank to resume
raising interest rates. BOCWATCH
 Primary dealers, however, are far more convinced of rate
hikes this year than the swaps curve suggests. A Reuters survey
of dealers -- the institutions that deal directly with the
central bank as it carries out monetary policy -- found
September was the most likely starting point for the Bank of
Canada's next phase of interest rate increases. [CA/POLL]
 At 8:15 a.m. (1215 GMT), the Canadian dollar CAD=D4 was
at C$0.9683 to the U.S. dollar, or $1.0327, up a touch from
C$0.9686 to the U.S. dollar, or $1.0324, at Tuesday's close.
 Canada's two-year bond CA2YT=RR dipped 1 Canadian cent to
yield 1.543 percent, while the 10-year bond CA10YT=RR gained
12 Canadian cents to yield 3.063 percent.
 The Bank of Canada will auction C$700 million in 30-year
real return auctions later in the session.
 (Reporting by Ka Yan Ng; Editing by Padraic Cassidy)