CANADA FX DEBT-C$ stays near 3-1/2 year highs ahead of BoC

Mon Apr 11, 2011 5:25pm EDT
 
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   * C$ ends at C$0.9565, or $1.0455
 * Focus on Bank of Canada rate decision and comments
 * Bond prices lower
 (Adds details, comments)
 By Solarina Ho
 TORONTO, April 11 (Reuters) - The Canadian dollar finished
higher against the greenback on Monday, trading near a 3-1/2
year high ahead of a Bank of Canada interest rate announcement
on Tuesday and the bank's quarterly report on Wednesday.
 "We're just biding our time ... There really isn't too much
traders want to push the (Canadian) dollar one way or the other
in anticipation of that," said David Tulk, chief macro
strategist at TD Securities.
 "That's probably going to be the event of the week and
probably the event of the month in terms of its currency
implications."
  A Reuters poll of 41 economists and strategists last week
found unanimous agreement that the central bank will keep its
key interest rate at 1 percent on Tuesday. [ID:nN07149592]
[CA/POLL]
 The currency CAD=D4 finished the session at C$0.9565 to
the U.S. dollar, or $1.0455, firming from Friday's North
American close of C$0.9574, or $1.0445. The day's high was
C$0.9543, or $1.0479.
 Traders will be keen to see if the central bank's comments
on the currency become more explicit. The Bank of Canada had
previously expressed concerns over the soaring Canadian dollar,
which has been trading near 3-1/2 year highs, holding above
C$0.9600 to the U.S. dollar, or $1.0400.
 Greater spotlight on the Canadian dollar could be viewed as
showing the bank is dovish on interest rates and in no rush to
raise them.
 Last week's Reuters's poll found respondents largely
expected the bank to raise rates for the first time this year
on July 19, a shift from the previous survey, in which the
median forecast was for the next increase to be in May.
 "If there's any acknowledgment they're concerned with
inflation expectations moving higher ... that would be some
indication that they're probably going to hike sooner than
July," Tulk said.
  "(Wednesday's) Monetary Policy Report looks like it's
going to have to take a somewhat more optimistic tone than they
had in January," said David Watt, a senior currency strategist
at RBC Capital Markets.
 "There's general optimism about global growth ... it's a
relatively positive backdrop for the Canadian dollar."
 Oil prices, which often set direction for the
commodity-linked currency, took a backseat on Monday ahead of
the bank announcement. The Canadian dollar appeared to largely
brush off a more than 2 percent drop in crude prices. [O/R]
 Canadian bond prices were lower across the curve, with the
two-year bond CA2YT=RR, particularly sensitive to interest
rate moves by the Bank of Canada,  down 8.5 Canadian cents to
yield 1.942 percent. The 10-year bond CA10YT=RR shed 34
Canadian cents, yielding 3.489 percent.
 (Editing by Peter Galloway)