CANADA FX DEBT-C$ backs off 1-week high on Fed reticence
* C$ ends at C$0.9726 to the U.S. dollar, or $1.0282
* Hits one-week high, then retreats
* Bond prices flat to higher
* Fed downgrades economic assessment, sees pickup (Adds details)
TORONTO, June 22 (Reuters) - The Canadian dollar touched a one-week high against the greenback on Wednesday, then reversed course after the U.S. Federal Reserve gave no hint that it would offer more monetary support to the U.S. economy. [ID:nN1E75K22F]
The Fed said the pace of U.S. economic recovery was proceeding more slowly than it had expected, but it expressed hope that growth would pick up soon without it pumping money into the system for a third time. [ID:nN1E75K22F]
"There was a glimmer of hope that at some point the Fed would turn to QE3, but Bernanke pushed that hope very far off into the future," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
The Canadian currency pushed as high as C$0.97 to the U.S. dollar, or $1.0309, its highest level since June 15. But by the the end of the North American session, mirroring movements in the euro, the Canadian dollar CAD=D4 erased those gains and finished at C$0.9726 to the U.S. dollar, or $1.0282, slightly lower than Tuesday's finish of C$0.9724, or $1.0284.
The Fed said it will end its second round of quantitative easing, or QE2, as planned at the end of this month and continue reinvesting principal payments.
"They pretty much stuck to their guns about a second half recovery and suggested the bar was set relatively high for QE3, but again, that was already mostly built into expectations," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
Early in the day, the currency had fallen as low as C$0.9754 to the U.S. dollar, or $1.0252, but clawed back on relief that the Greek government had survived a parliamentary confidence vote, overcoming a key hurdle to a debt deal.
Still, pressure was on the debt-ridden country to approve tough austerity measures before it gets fresh funding from the European Union and the International Monetary Fund. [ID:nLDE75K21X]
Canadian Finance Minister Jim Flaherty called on Europe on Wednesday to get a "clear voice" to stop the Greek crisis from spreading [ID:nLDE75K21X] and the Bank of Canada said the single biggest threat to Canadian banks comes from sovereign debt problems.
But in its twice-yearly Financial System Review, the central bank also concluded the Canadian banking system overall is sound and resilient. [ID:nN1E75L04K]
In remarks to a Senate committee, Bank of Canada Governor Mark Carney said the country's economic growth is expected to slow to modest rates in the short term, echoing comments made in the Financial System Review and the outlook in the bank's most recent Monetary Policy Report. [ID:nOLAMHE7FK]
Canadian government bond prices were flat to higher across the curve, tracking their U.S. counterparts, after the Fed lowered its growth outlook.
The two-year bond CA2YT=RR edged up 2 Canadian cents to yield 1.510 percent, while the 10-year bond CA10YT=RR climbed 6 Canadian cents to yield 2.974 percent. (Reporting by Ka Yan Ng; additional reporting by Julie Haviv in New York; editing by Peter Galloway)
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