CANADA FX DEBT-C$ slumps as oil dips; BOC rate decision eyed

Tue Jan 19, 2010 8:39am EST
 
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 * Lower at C$1.0291 to the US$, or 97.17 cents
 * Market awaits Bank of Canada rate announcement
 * Bond prices flat across curve
 By Claire Sibonney
 TORONTO, Jan 19 (Reuters) - The Canadian dollar fell
slightly against the U.S. currency on Tuesday morning as
commodity prices lost steam and investors piled back into the
greenback after a long weekend.
 Disappointing economic news overseas, including a fourth
straight decline in German investor confidence, helped play to
the U.S. dollar's strength.
 "It's a bit of the old risk-off trade today," said Doug
Porter, deputy chief economist at BMO Capital Markets.
 "What we've seen pretty much for the past year is when
investors are bullish on the global economy and bullish on the
outlook they've been moving out of the U.S. dollar and into
other currencies and commodities and when they're a bit more
cautious on the economic outlook broadly they've tended to plow
back into the US dollar and out of commodities."
 By 8:31 a.m. (1331 GMT), the Canadian dollar had weakened
to C$1.0291 or 97.17 U.S. cents from its close at C$1.0265 to
the U.S. dollar, or 97.42 U.S. cents on Monday.
 The currency pared some losses after a report that Canada's
composite leading indicator soared by 1.5 percent in December,
the largest month-on-month increase for almost 27 years, pushed
up by household spending and a surging stock market.
[ID:nOTT003842]
 Porter said the markets are not expecting much action from
the Bank of Canada rate announcement at 9:00 a.m. (1400 GMT) in
which the bank is widely expected to keep rates steady at 0.25
percent. [ID:nN15201393]
 All of the 11 primary dealers surveyed last week forecast
the central bank would stand pat on rates and most expect it to
maintain its conditional commitment to keep the key overnight
rate at its current level until the end of the second quarter.
All see a rate hike at some point this year. [CA/POLL]
 "The fact is the economy hasn't really significantly
surprised the Bank of Canada in the past 3 months so there's
really no reason for the bank to send any major signs of a
change of thinking just yet," said Porter.
 Canadian bond prices were mostly weaker across the curve,
mirroring losses in other major markets as prices fell after UK
inflation hit a 9-month high. [US/]
 (Editing by Jeffrey Hodgson)