CANADA FX DEBT-C$ ends 11-day run higher, bonds firm

Mon Mar 15, 2010 4:57pm EDT
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 * C$ ends lower at 98.07 U.S. cents
 * Currency's streak of gains ends after 11 sessions
 * Bonds firmer on weak stocks, ahead of Fed rate decision
 (Adds details)
 By Ka Yan Ng
 TORONTO, March 15 (Reuters) - The Canadian dollar tipped
lower against the U.S. currency on Monday as easing oil prices
and lower stock markets caused investors to pause for the first
time after an 11-day stretch of gains.
 But even as risk appetite waned, the currency held near its
20-month highs. Another day of gains was not in the cards,
however, as prices for oil, a key Canadian export, dropped
below $80 a barrel and monetary policy concerns mounted. [O/R]
 The Canadian dollar climbed in the overnight session,
peaking at C$1.0165 to the U.S. dollar, or 98.38 U.S. cents,
but was mainly lower for much of the North American session.
 It closed at C$1.0197 to the U.S. dollar, or 98.07 U.S.
cents, down from Friday's close at C$1.0183 to the U.S. dollar,
or 98.20 U.S. cents.
 "The trade is pretty crowded long Canada. It's not out of
context to see a bit of Canadian dollar pullback," said John
Curran, senior vice president at CanadianForex, a commercial
foreign exchange dealing firm.
 He said that even though the currency managed to break a
key resistance level last week, he's not convinced the Canadian
dollar is ready to to move out of its recent ranges. He said a
shakeup is needed, and that it could possibly stem from
Friday's February Canadian inflation data.
 Among upcoming economic data, the consumer price index for
February is the most likely to firm up views on whether the
Bank of Canada will speed up its schedule for raising interest
 Decisions from U.S. and Japanese central bank policy
meetings this week, attempts to resolve Greece's debt woes and
worries that China may further tighten its monetary policy are
other factors that could affect markets as investors seek to
gauge the progress of global economic recovery.
 The broader outlook for the Canadian currency is positive,
said Steve Butler, director of foreign exchange trading at
Scotia Capital
 "The fundamentals in Canada look relatively strong," he
said. "When you compare us to the States, the U.K., the euro
zone, the story in Canada looks better,"
 These fundamentals are among reasons fueling ripening
conditions for the Canadian dollar to again test parity with
the greenback. [ID:nN12154904]
 Canadian bond prices reclaimed some ground on Monday, after
having largely been on the decline since investors started
pricing in domestic interest rate hikes after a recent series
of strong data.
 The strength also mirrored moves in the bigger U.S.
Treasuries market, where prices rose against a backdrop of soft
stock markets and scarce buying ahead of Tuesday's Federal
Reserve one-day policy meeting. [US/]
 Investors widely expect the U.S. central bank to stick to
the near zero percent interest policy it adopted in December
2008 to support the economic recovery, but it is uncertain
about signals about its exit strategy.  [ID:nN10148647]
 The two-year government bond CA2YT=RR rose 3 Canadian
cents to C$99.87 to yield 1.567 percent, while the 10-year bond
CA10YT=RR was up 37 Canadian cents at C$102.01.
 Canadian bonds outperformed their U.S. counterparts across
the curve. The difference between 10-year yields widened 4.5
basis points to 20.8 basis points.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)