UPDATE 2-C$ eases from 1-month high; little Carney impact

Wed Jun 16, 2010 4:55pm EDT
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   * C$ ends at C$1.0254, or 97.52 U.S. cents.
 * BoC's Carney: Don't take rate hike for granted
 * Bond prices firmer across the curve
 (Updates to close, adds quotes)
 By Jennifer Kwan
 TORONTO, June 16 (Reuters) - The Canadian dollar fell from
a one-month high against the U.S. currency on Wednesday to
close slightly lower as stock markets and investor appetite for
risk lost steam late in the session.
 The Canadian dollar earlier touched C$1.0224 to the U.S.
dollar, or 97.81 U.S. cents, its best level since May 14,
strongly supported by higher oil prices. [O/R]
 But choppiness in equity markets, which saw Toronto's
resource-heavy index barely close with gains, helped drag the
currency lower. [.TO] [.N]
 "Stocks were in positive territory for a while and they
just eased off. That's put a little bit of pressure on Canada,"
said Steve Butler, director of foreign exchange trading at
Scotia Capital.
 The market largely shrugged off comments by Bank of Canada
Governor Mark Carney in a speech and press conference in Prince
Edward Island.
 The head of the central bank cautioned markets not to take
another interest rate hike for granted, saying volatile global
conditions mean no particular path for monetary policy is
preordained. [ID:nN16164000]
 "I don't know if he gave us anything that could cement a
view one way or the other," said Butler, but added: "I do think
we will see another rate hike in July."
 The central bank raised its key rate by a quarter point on
June 1 to 0.5 percent, becoming the first central bank in the
Group of Seven wealthy countries to do so. Markets are pricing
in a second rate hike on July 20. [BOCWATCH]
 The Canadian currency finished at C$1.0254 to the U.S.
dollar, or 97.52 U.S. cents, down slightly from C$1.0251, or
97.55 U.S. cents, at Tuesday's close.
 Earlier, the currency got much of its lift from a move in
the oil price to above $77 a barrel, said Matthew Strauss,
senior currency strategist at RBC Capital Markets. The rise was
also facilitated by the currency's ability to punch through key
technical levels.
 Carney's speech offered "nothing really new or no new
insight into monetary policy thinking from the Bank of Canada
perspective," Strauss said, adding it "provided no direction"
for the Canadian dollar.
 Strauss said the next key technical levels for the currency
are C$1.0225 to the U.S. dollar and C$1.0111. On the top side,
analysts would be eyeing C$1.0328.
 Canadian bond prices rose across the curve, tracking U.S.
Treasury issues, which benefited from a report showing U.S.
housing starts in May fell more than expected to a five-month
low. [US/]
 The two-year government bond CA2YT=RR rose 9.5 Canadian
cents to yield 1.777 percent, while the 10-year bond
CA10YT=RR rose 55 Canadian cents to yield 3.363 percent.
 Canadian bonds outperformed U.S. treasuries. The Canadian
10-year bond yield was 9.7 basis points above its U.S.
counterpart, compared with 12 basis points on Tuesday.
 The Bank of Canada said on Wednesday its C$3 billion
auction of 2.5 percent Government of Canada bonds due Sept. 1,
2013 produced an average yield of 2.393 percent. [CA/AUC]
 Bids from primary dealers totaled C$7.296 billion,
resulting in a bid-to-cover ratio of 2.43. The ratio is a
measure of investor demand and a reading above 2 generally
indicates a solid auction.
 "(There was) fairly decent demand. It was a good auction,"
said Sheldon Dong, fixed income analyst at TD Waterhouse
Private Investment.
 "The global financial markets are still pretty much
unsettled so there is still a flight to quality. So short-term
debt is a good way to park your money."
 (With additional writing by Jeffrey Hodgson)