CANADA FX DEBT-C$ firms but gains limited by Fed speculation

Wed Aug 24, 2011 5:34pm EDT
 
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 * C$ ends up at C$0.9866 to the U.S. dollar, or $1.0136
 * Canadian bond prices end mostly lower
 * Strong U.S. encourages outflows from greenback
 (Adds details)
 By Ka Yan Ng
 TORONTO, Aug 24 (Reuters) - Canada's dollar ended firmer
against the greenback on Wednesday after strong U.S. data
encouraged risk-taking, though gains were capped by uncertainty
over whether the Federal Reserve was about to launch more
economic stimulus.
 Stronger-than-expected data on July durable goods offered a
glimmer of hope that the U.S. economy would avoid a double-dip
recession, boosting demand for riskier assets and encouraging
an outflow from the safe-haven U.S. dollar.
  The Canadian dollar rose to a session high soon after the
data was released and rose as high as C$0.9840 to the U.S.
dollar, or $1.0163.
 U.S. stocks posted strong gains for a second day, and
Toronto's main index eked out a small gain by session's end,
with weaker gold limiting its rise. Equity market movements, as
a barometer of risk, are closely correlated to the Canadian
dollar's movements.  [MKTS/GLOB] [.TO]
 "Stocks have rallied but they haven't really been able to
explode higher. I think there's still a little bit of
skepticism out there," said George Davis, chief technical
analyst at RBC Capital Markets.
 The Canadian currency CAD=D4 finished higher for a second
straight session, rising to C$0.9866 to the U.S. dollar, or
$1.0136, from C$0.9880 to the U.S. dollar, or $1.0121, at
Tuesday's close.
 U.S. durables goods orders in July rose twice as much as
expected on strong demand for aircraft and motor vehicles, but
a gauge of business spending fell. The data also topped
economists estimates after excluding the volatile
transportation sector. [ID:nCAT005498]
 It was a welcome change from a spate of weak sentiment
surveys recently.
 Still, consumer confidence in Canada flashed cautious
signals, as sentiment slumped in August for a fourth straight
month, bringing the Conference Board of Canada's index to its
lowest since July 2009. [ID:nN1E77N0QY]
 The durable goods data spurred an exit from gold, which is
now more than $150 below Tuesday's record of $1,911.46 an
ounce.
 Bullion prices have been driven by intense speculation the
U.S. Federal Reserve may be planning another round of stimulus
for the sluggish U.S. economy.[GOL/]
 WAITING FOR FRIDAY
 Investors are eagerly waiting to see if the Fed announces
further stimulus a year after Chairman Ben Bernanke launched a
second round of quantitative easing to revive the struggling
U.S. economy.
 Markets have speculated that Bernanke may announce a third
round at a speech on Friday to a gathering of central bankers,
economists, and academics in Jackson Hole, Wyoming.
 The uncertainty has locked the Canadian dollar in a tight
range for the last several sessions.
 "Still the market is compressing the range in dollar/Canada
with the ultimate breakout being a function of what happens on
Friday," said Jack Spitz, managing director of foreign exchange
at National Bank Financial.
 Canadian government bonds, along with their U.S.
counterparts, were among the safe-haven assets that were hit
hard on Wednesday. Bond prices fell steeply as the gold dropped
4 percent, its biggest one-day drop in 2-1/2 years.
 Canada's two-year bond CA2YT=RR fell 9 Canadian cents to
yield 0.999 percent, while the 10-year bond CA10YT=RR lost 55
Canadian cents to yield 2.450 percent. Canadian bonds
outperformed their U.S. counterparts across the curve, except
in the two-year maturity.
 (Editing by Frank McGurty)