CANADA FX DEBT-C$ strengthens on Fed comments, China growth

Wed Jul 13, 2011 12:47pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

   * C$ at C$0.9587 to U.S. dollar, or $1.0431
 * Strong Chinese GDP data gives initial support
 * Bernanke comments on possible easing add to momentum
 * Commodities also jump on Fed, data
 * Bond prices lower across the curve
 By Trish Nixon
 TORONTO, July 13 (Reuters) - Canada's dollar rose sharply
against the greenback on Wednesday, after comments from Federal
Reserve Chairman Ben Bernanke and positive Chinese economic
data soothed investors jittery over the euro zone debt crisis.
 Bernanke said the central bank is ready to ease monetary
policy further if the economy weakens and inflation moves
lower, suggesting policymakers are actively mulling further
stimulus. [MKTS/GLOB]
 "Even the mention of potentially more moves has weakened
the U.S. dollar dramatically across the board," said Firas
Askari, head of foreign exchange trading at BMO Capital
 "The little flight to quality the U.S. dollar has had out
of all the European news has now gone the other way."
 Earlier, data showed China's economy grew faster than
expected in the second quarter, which initially boosted
investor appetite for riskier assets. [ID:nL3E7ID0AS]
 Commodity prices soared, helping drive Canadian dollar
gains. Canada relies heavily on resource exports and its
currency is affected by swings in their prices.
 The Thomson Reuters-Jefferies Index .CRB, a global
commodities benchmark, was up 1.66 percent.
 At 11:45 a.m. (1545 GMT), the currency CAD=D4 stood at
C$0.9587 to the U.S. dollar, or $1.0431, up from Tuesday's
North American finish at C$0.9662, or $1.0350.
 It earlier rose as high as C$0.9578 to the U.S. dollar, or
$1.0441, its strongest level since July 8.
 Askari said he expects the Canadian dollar to continue to
meet resistance around C$0.95 through the summer and until
there is some resolution of global uncertainties.
 "The only headwinds that the Canadian economy is facing are
nondomestic in nature. I think if we see some sort of
stabilization on the global scale you are going to see monetary
policy shift here and probably shift relatively quickly."
 A tightening of monetary policy by the Bank of Canada would
likely help attract foreign capital, and drive the Canadian
dollar higher.
 A Reuters survey published on Wednesday found forecasters
expect the Bank of Canada to raise interest rates sometime in
the fourth quarter as a sturdy, if unspectacular, domestic
recovery offsets global headwinds. [CA/POLL]
 Bonds prices were lower across the curve as investors moved
back into riskier assets.
 The Canadian two year bond CA2YT=RR fell 9 cents to yield
1.492 percent, while the 10-year bond CA10YT=RR was off 63
cents, yielding 2.967 percent.
 Canadian bonds mostly underperformed U.S. Treasuries, with
the Canadian 10-year yield 2.4 basis points above its U.S.
counterpart, compared with 1.8 basis points higher yesterday.
 (Editing by Jeffrey Hodgson)