CANADA FX DEBT-C$ heads higher as rate hikes reconsidered

Wed Jun 2, 2010 11:14am EDT
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* C$ rises to 95.77 U.S. cents

* Bond prices softer across curve (Updates to midmorning)

By Ka Yan Ng

TORONTO, June 2 (Reuters) - The Canadian dollar gained ground against the U.S. currency on Wednesday as investors shifted to riskier assets such as equities, and as market players maintained expectations the Bank of Canada would continue its rate-hike path.

The currency gained marginally after the overnight session as mixed signals on equity and commodity markets gave little impetus to push either way.

There was also a slight overhang from the Bank of Canada, which raised interest rates on Tuesday, as expected, but gave no clear indication whether it would continue to do so. [ID:nN01103957] [ID:nN01264788] [ID:nN01123836]

But there was some reconsideration on Wednesday as market players still expect interest rates to rise this year.

Most of Canada's primary securities dealers, surveyed on Tuesday, maintained their interest rate forecasts for the rest of the year, even though the Bank of Canada warned against betting that it would embark on an uninterrupted campaign of rate increases. [ID:nN01126499]

"Canada's fundamentals are still very strong. They will be raising rates eventually and the world doesn't seem to mind if it's a little bit down the road, they'll still invest in the Canadian dollar," said John Curran, senior vice-president at CanadianForex, a commercial foreign exchange firm.   Continued...