CANADA FX DEBT-C$ hits highest in more than a week

Wed Nov 4, 2009 8:29am EST
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 * C$ rises to 94.14 U.S. cents
 * Bonds slip as stocks gain
 * U.S. Federal Reserve, Bank of Canada in focus
 TORONTO, Nov 4 (Reuters) - The Canadian dollar hit its
highest level in more than week against the U.S. dollar on
Wednesday morning, building on gains made on the back of rising
oil and record gold prices ahead of a key interest rate
decision by the U.S. Federal Reserve.
 The gains follow two straight higher closes this week, as
gold prices cruised to a record high above $1,095 an ounce and
as climbing oil prices also lifted the commodity-linked
currency. [GOL/] [O/R]
 The Canadian dollar strengthened as high as C$1.0597 to the
U.S. dollar, or 94.37 U.S. cents, its highest since Oct. 26.
 At 8:10 a.m. (1310 GMT), it was at C$1.0622 to the U.S.
dollar, or 94.14 U.S. cents, up from C$1.0682 to the U.S.
dollar, or 93.62 U.S. cents, at Tuesday's close.
 Global stock market advances also offered support, as
investors were encouraged by euro zone service sector growth
[PMI], and ahead of this afternoon's interest rate decision by
the U.S. Federal Reserve.
 A little-changed statement would likely put additional
pressure on the U.S. dollar, and fuel further gains in the
Canadian dollar.
 But before the Fed releases its decision at 2:15 p.m. (1915
GMT), market watchers may monitor Bank of Canada Deputy
Governor John Murray, who will be speaking in Prince George,
British Columbia, at 11:05 a.m. (1605 GMT), on "Central Banking
Revealed: How We Promote Canada's Economic and Financial
 Currency watchers may look to see if the Bank of Canada
will reiterate that it has a suite of tools at their disposal
to temper the currency's strength.
 "I wouldn't be surprised to hear the Bank of Canada speak
up as it did last week if we're able to break down below
C$1.05. We'll be watching very closely for that," said C.J.
Gavsie, managing director of foreign exchange sales at BMO
Capital Markets.
 "Eventually the market is going to start challenging the
Bank of Canada on its comments as far as what they'll use as
tools to step in to defend the strength in the Canadian dollar.
So far all they're doing is intervening by their comments."
 The currency's upward march was stalled mid-month in
October after it had neared a 15-month high, which Gavsie
attributed partly to the end of the fiscal year for Canadian
banks. That had taken risk off the table for several
currencies, including the Canadian dollar.
 But it now seems the market is prepared again to take the
Canadian currency higher, perhaps to parity, he said.
 One of the next key events likely to offer direction for
the Canadian dollar is Canadian employment data on Friday,
which is expected to show the economy added 10,000 jobs in
October, although overall influence may depend on the U.S.
nonfarm payrolls data due on the same morning.
 Canadian bond prices were moderately lower across the
curve, spurred by a renewal in risk appetite as stock markets
gained, ahead of Wednesday's statement from the U.S. Federal
Reserve on monetary policy.
 Market players will closely examine the statement to see if
the Fed alters its wording and lays the foundation for tighter
monetary policy at some point in the future. Investors will
also look for hints of when it might deploy an exit strategy
for its massive stimulus programs.
 The two-year bond CA2YT=RR slipped 6 Canadian cents to
C$99.64 to yield 1.427 percent, while the 10-year bond
CA10YT=RR fell 34 Canadian cents to C$102.21 to yield 3.476
 (Reporting by Ka Yan Ng; Editing by Theodore d'Afflisio)