CANADA FX DEBT-C$ rises as US$ slides; BoC releases outlook

Wed Oct 20, 2010 11:24am EDT
 
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   * C$ higher at C$1.0250, or 97.56 U.S. cents
 * Bond prices soften with risk-on move
 (Updates with MPR details, adds quote)
 TORONTO, Oct 20 (Reuters) - Canada's dollar climbed against
the U.S. currency on Wednesday as the greenback tumbled and the
Bank of Canada said in its Monetary Policy Report there was
still considerable monetary stimulus in place in Canada.
 The central bank, which left its benchmark interest rate
unchanged on Tuesday, also said it would have to consider any
further rate hikes carefully, given the patchy global recovery,
a weak U.S. outlook and expected curbs on Canadian growth.
[ID:nBCLKLE621]
 But the loonie's move higher was largely driven by external
factors, said Camilla Sutton, chief currency strategist at
Scotia Capital, citing a weak U.S. dollar.
 The greenback extended losses against the euro and yen on
Wednesday after a report from a U.S. think tank suggested the
Federal Reserve planned to boost growth by purchasing $500
billion in Treasury debt over six months. [FRX]
 "I think there's been a lot of rumor in the market over
speculation on the size of Fed quantitative easing and how soon
it will be put in place. That's pushed some U.S. dollar
weakness," she said.
 "In terms of the MPR: still sounding fairly dovish, noting
that heightened tensions in FX is a key vulnerability and also
making changes to the growth and inflation forecasts that were
highlighted in the statement. But still sounding like at some
point the Bank of Canada will be hiking interest rates."
 The Canadian dollar CAD=D4 rose to C$1.0240 to the U.S.
dollar, or 97.66 U.S. cents, up from Tuesday's finish at
C$1.0319 to the U.S. dollar, or 96.91 U.S. cents.
 At 10:57 a.m. (1457 GMT), it was at C$1.0250, or 97.56 U.S.
cents.
 The Canadian dollar had already been higher against the
U.S. dollar on Wednesday as appetite for higher-yielding
currencies stabilized after being jolted by a surprise interest
rate increase by China.
 With higher commodity and equity prices, reflecting
investor desire for risk, Canadian bond prices mostly softened.
[US/] The two-year bond CA2YT=RR fell 2 Canadian cents to
yield 1.348 percent, while the 10-year bond CA10YT=RR shed 31
Canadian cents to yield 2.739 percent.
 (Reporting by Jennifer Kwan; editing by Rob Wilson)