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