CANADA FX DEBT-C$ sags on U.S. Fed's discount rate rise

Fri Feb 19, 2010 8:13am EST
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 * C$ falls to 95.19 U.S. cents
 * Bond prices weaken
 TORONTO, Feb 19 (Reuters) - Canada's dollar slumped against
the U.S. currency on Friday, while government bond prices were
mostly lower, in the wake of the U.S. Federal Reserve's
surprise increase in its discount rate.
 The Fed said late on Thursday the discount rate would be
increased to 0.75 percent from 0.50 percent, effective Friday,
although it left the benchmark federal funds rate, its main
policy tool, unchanged near zero. [ID:nSGE61I036]
 Market players interpreted the move as a sign that the U.S.
central bank could move sooner than expected on increasing its
benchmark fed funds rate even as the Fed moved to calm such
 "The market is pricing in Fed hikes," said Jack Spitz,
managing director of foreign exchange at National Bank
Financial. "The Canadian dollar has been swept up in the U.S.
dollar buying in the post-Fed decision."
 At 7:55 a.m. (1255 GMT), the Canadian dollar was at
C$1.0505 to the U.S. dollar, or 95.19 U.S. cents, down sharply
from the near one-month high at C$1.0414 to the U.S. dollar, or
96.02 U.S. cents, at Thursday's close.
 It had weakened as low as C$1.0531 to the U.S. dollar, or
94.96 U.S. cents earlier.
 Canadian government debt was mostly lower across the curve
on Friday after the surprise Fed move.
 The two-year Canadian government bond CA2YT=RR was off 3
Canadian cents at C$100.22 to yield 1.391 percent, while the
10-year bond CA10YT=RR fell 1 Canadian cent to C$102.02 to
yield 3.493 percent.
 Later in the session, market players will take in Canadian
data for December retail sales and the January leading
indicator, as well as U.S. January consumer prices.
 (Editing by Theodore d'Afflisio)