CANADA FX DEBT-C$ sags on oil; shrugs off Bank of Canada

Thu Jan 21, 2010 12:51pm EST
 
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 * C$ lower at C$1.0475 to the US$, or 95.47 US cents
 * Central bank report paints brighter growth picture
 * Bond prices flat to slightly higher
 (Adds details, quote)
 By Jennifer Kwan
 TORONTO, Jan 21 (Reuters) - The Canadian dollar sagged
against the U.S. currency on Thursday, pressured by weak oil
prices, while largely shrugging off a Bank of Canada report
that painted a slightly rosier inflation and growth picture.
 In its Monetary Policy Report, the central bank raised its
economic growth projection for the final three quarters of this
year and forecast inflation throughout 2010 would be higher
than it had expected. [ID:nBAC002364]
 The Canadian currency's reaction was muted, said Camilla
Sutton, currency strategist at Scotia Capital, noting that in
its decision on Tuesday to keep rates unchanged, the central
bank had covered much of the same ground.
 "The report was very neutral. It was very much in line with
the commentary we heard on Tuesday. They'd already given us
some insight on growth changes so we just have that now firmed
up," she said.
  After the report's release, central bank Governor Mark
Carney repeated the bank's pledge to keep interest rates at
current levels until the end of June as long as inflation
remains in check. He declined to forecast rates beyond June.
 At 12:15 p.m. (1715 GMT), the Canadian dollar was at
C$1.0475 to the U.S. dollar, or 95.47 U.S. cents, a sliver
below Wednesday's finish of C$1.0470 to the U.S. dollar, or
95.51 U.S. cents.
 Earlier, the Canadian dollar hit a low of C$1.0525, or
95.01 U.S. cents, hurt by broad U.S. dollar strength.
 By midday the greenback had given up gains against the yen
made earlier on Thursday as increased risk aversion knocked
stocks lower and as President Barack Obama announced plans to
place new limits on some proprietary bank trading. [FRX/]
 Those pressures on the greenback helped the Canadian
currency fight back, said Michael Gregory, senior economist at
BMO Capital Markets.
 BONDS FIRMER
 Canadian government bond prices were mixed but mostly
higher, mirroring U.S. Treasuries, which rose as stocks tumbled
and money flowed to less risky assets. [US/]
 "Part of that is related to risk. U.S. Treasury market
yields are down and prices are up pretty solidly. Canada is
following that a little," Gregory said.
 The two-year bond CA2YT=RR was largely unchanged, down 1
Canadian cent at C$100.08 to yield 1.209 percent. The 30-year
bond CA30YT=RR climbed 23 Canadian cents to C$116.50 to yield
4.002 percent.
 (Editing by Peter Galloway)