CANADA FX DEBT-C$ pulls back after China bank tightening

Fri Jan 14, 2011 8:23am EST
 
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 * C$ falls to $1.0036
 * Bond prices mixed across the curve
 By Claire Sibonney
 TORONTO, Jan 14 (Reuters) -  The Canadian dollar fell
against the greenback for a second day on Friday, dropping
almost a penny and inching back to parity after China's central
bank raised lenders' required reserves to tame inflation.
 China's move was the fourth in just over two months and
fanned expectation that Beijing's appetite for buying
commodities could lessen, which hit oil and material prices, as
well as commodity-linked currencies such as the Canadian
dollar. [ID:nTOE706030]
 At 8:00 a.m. (1300 GMT), the Canadian dollar CAD=D4 stood
at C$0.9964 to the U.S. dollar, or $1.0036, down from
Thursday's close at C$0.9892 to the U.S. dollar, or $1.0109,
when it finished lower for the first time in 13 sessions.
 "The softening up of commodity prices is obviously not
helping Canada today," said Steve Butler, director of foreign
exchange trading at Scotia Capital. "This negative risk news,
negative commodity news, caught the short-covering quickly."
 Butler sees the immediate range for the currency now
between C$0.9910 to C$1.0040.
  Investors will be watching key U.S. inflation and retail
sales data and a Thomson Reuters/University of Michigan's
reading on consumer sentiment later in the morning.
 Analysts are also awaiting the Bank of Canada's interest
rate decision next week, with particular focus on the tone of
central bank chief, Mark Carney, which may provide further
direction for the currency.
  A Reuters poll of 45 forecasters unanimously predict the
Bank of Canada will keep interest rates unchanged when it
announces its decision Jan. 18. More than half the respondents
said the next rate hike would occur sometime in the first half
of 2011. [ID:nN1340408]
 Canadian government bond prices were mixed across the
curve.
 The two-year bond CA2YT=RR was down 4 Canadian cents to
yield 1.797 percent, while the 10-year bond CA10YT=RR gained
2 Canadian cents to yield 3.250 percent.
  (Editing by Padraic Cassidy)