CANADA FX DEBT-C$ falls as caution and commodities weigh
* C$ ends down at 92.81 U.S. cents
* Fed, G20 meetings in focus
* Bonds lower, await Fed, wave of supply (Updates to close)
By Ka Yan Ng
TORONTO, Sept 21 (Reuters) - The Canadian dollar fell against a broadly firmer U.S. currency on Monday, weighed down by lower commodity prices and weakening stock markets.
The currency recovered from session lows, tracking a similar turnaround by Toronto's main stock index. [.TO] But it was still under pressure from commodities, a reflection on Canada's resource-based economy.
The price of oil CLc1, a key Canadian export, fell below $70 a barrel, while gold remained well off 18-month highs but made its way back above $1,000 an ounce. [O/R] [GOL/] [MET/L]
The Canadian dollar ended at C$1.0775 to the U.S. dollar, or 92.81 U.S. cents, down from C$1.0697 to the U.S. dollar, or 93.48 U.S. cents at Friday's close. During the session it dipped as low as C$1.0855 to the U.S. dollar, or 92.12 U.S. cents.
The mood in currency markets was cautious ahead of this week's G20 summit and a two-day U.S. Federal Reserve meeting. The U.S. dollar rose as investors reduced bets against the greenback ahead of the monetary policy meeting by the U.S. central bank. [FRX/]
"Going into this week the risks were biased towards the U.S. dollar probably seeing a bit of a reprieve and that is part of what we're seeing today," said David Watt, senior currency strategist, at RBC Capital Markets.
The Fed is likely to hold rates steady at its meeting, which starts on Tuesday, but markets are still eager to know if the central bank will soon unwind some stimulus programs due to a pickup in economic data.
"(The exit strategy) has a lot of people somewhat wary, especially given the extent of U.S. dollar shorts. So that's one of the reasons why we have been watching for the possibility that the U.S. dollar get a bit of reprieve," Watt said.
Later in the week, leaders from the Group of 20 nations will meet in Pittsburgh. Among major issues expected to be discussed will be bankers' pay and the need to examine strategies for withdrawing state stimulus. [ID:nLH78576]
BONDS MOSTLY FALL
Without much economic data to guide trading, most Canadian bond prices followed their U.S. counterparts [US/] lower as new debt supply loomed.
Investors are on guard for a near record $112 billion in shorter-dated U.S. Treasury issues due this week, as well as comments about the economy following the Fed meeting.
Prices were higher across the curve to start the day when stock markets held deeper losses.
The two-year bond CA2YT=RR was the only advancer, as it edged up 1 Canadian cent to C$99.46 to yield 1.283 percent. The 10-year bond CA10YT=RR fell 14 Canadian cents to C$102.76 to yield 3.412 percent. The 30-year bond CA30YT=RR dropped 37 Canadian cents to C$117.93 to yield 3.931 percent.
Canadian bonds mostly underperformed their U.S. counterparts across the curve. The Canadian 10-year bond yield moved to 7.2 basis points below its U.S. counterpart, compared with 7.4 basis points at the previous close.
A report on Monday showing foreign investors reduced their overall holdings of Canadian securities in July had little impact on the market. The report also showed that foreign investment in bonds so far this year is at record-breaking levels. (Reporting by Ka Yan Ng; editing by Rob Wilson)
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