CANADA FX DEBT-C$ drifts higher in light trade

Mon Jan 17, 2011 9:27am EST
 
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 * C$ edges up to $1.0128
 * Healthy fundamentals provide support
 * Volumes light due to U.S. holiday
 By Claire Sibonney
 TORONTO, Jan 17 (Reuters) - The Canadian dollar firmed
slightly against the greenback on Monday, holding well above
parity on the back of its healthy fundamentals, with trading
volumes light due to a U.S. holiday.
 At 9:15 a.m. (1415 GMT), the currency  was at C$0.9874 to
the U.S. dollar, or $1.0128, up from Friday's North American
finish C$0.9894 to the U.S. dollar, or $1.0107.
 The currency's CAD=D4 gains were kept in check by a
narrow range between C$0.9865 to C$0.9910.
 "The Canadian dollar is moving higher along with about half
the majors against the U.S. dollar today, and nothing too
shocking of course as the United States is out for the holiday,
but it's been a fairly restrained range," said Sacha Tihayni,
currency strategist at Scotia Capital.
 U.S. markets were shut for the Martin Luther King holiday.
 "It's interesting because the commodity complex is somewhat
weaker ... very light supply/demand flows in the market and
just underpinned by perhaps by the reason that you can't really
find a good reason to sell the Canadian dollar today just
because of the short-term fundamental story," Tihanyi added.
 He noted that the Bank of Canada interest rate announcement
on Tuesday will provide further direction.
 "There is a lot of risk in the market, just on what kind of
comments they could make regarding where the currency is
trading vis-a-vis the assumptions that they place in their
forecast."
 The central bank is unanimously expected to keep interest
rates steady at 1 percent, but primary dealers and global
forecasters are pulling forward targets for the next rate hike.
[ID:nN1340408]
 Besides the bank's rate announcement, further direction is
expected to be driven by the Bank of Canada's Monetary Policy
Report on Wednesday.
 Canadian government bond prices were little changed. The
two-year bond CA2YT=RR added 2 Canadian cents to yield 1.781
percent, while the 10-year bond CA10YT=RR gained 4 Canadian
cents to yield 3.266 percent.
 (Editing by Jeffrey Hodgson)