CANADA FX DEBT-C$ fall deepens after central bank statement

Tue Jan 19, 2010 10:06am EST
 
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 * Touches near one-week low at C$1.0350 to the US$
 * BoC holds rates steady, revises growth outlooks
 * Bond prices flat to lower across curve
 (Adds details, quotes)
 By Jennifer Kwan
 TORONTO, Jan 19 (Reuters) - The Canadian dollar fell
against the U.S. currency on Tuesday morning after the Bank of
Canada held interest rates steady and revised its 2010 economic
growth forecast a hair lower.
 The central bank kept its overnight lending rate at 0.25
percent and repeated its conditional commitment to hold the
rate at that level until the end of the second quarter. It said
it now expects 2010 growth of 2.9 percent, down from its
previous 3.0 percent forecast, and 2011 growth of 3.5 percent,
up from its previous 3.3 percent forecast. [ID:nBAC002362]
 The currency fell as low as C$1.0350 to the U.S. dollar, or
96.62 U.S. cents, its lowest level since Jan. 13, from around
C$1.0305 just before the announcement.
 "I would think it's just some type of positioning," Camilla
Sutton, currency strategist Scotia Capital, said of the
currency market's reaction to the bank statement. "Those who
were hoping that dollar/Canada would be moving lower just
clearing out positions... All in all, I think this is a very
neutral statement."
 All of the 11 primary dealers surveyed last week by Reuters
had forecast the central bank would stand pat on rates this
week and most expected 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]
 Doug Porter, deputy chief economist at BMO Capital Markets,
said the market may be interpreting the bank's statement as
slightly dovish.
 "There might have been some expectation in the market that
the bank would be a little bit firmer in when they moved off
their conditional commitment," he said. "It seems the currency
market is interpreting the press statement as being ever so
slightly dovish but the currency was under pressure in any
event heading into this for broader reasons."
 At 9:38 a.m. (1438 GMT), the Canadian dollar was at
C$1.0318, or 96.92 U.S. cents, down from its close of C$1.0265
to the U.S. dollar, or 97.42 U.S. cents, on Monday.
 Before the bank's statement, the Canadian currency had
sagged as commodity prices lost steam and investors piled back
into the greenback after a long weekend in the United States.
 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," Porter said.
 "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 U.S. dollar and out of commodities."
 Also on Tuesday, a report showed 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]
 BONDS WEAKER
 Canadian bond prices were mostly weaker across the curve,
mirroring losses in other major markets as prices fell in
Europe due to inflation concerns. [US/]
 The two-year Canada bond CA2YT=RR slipped 2 Canadian
cents to C$99.55 to yield 1.280 percent, while the 30-year bond
CA30YT=RR dropped 40 Canadian cents to C$115.45 to yield
4.059 percent.
 (Additional reporting by Claire Sibonney; editing by Peter
Galloway)