CANADA FX DEBT-C$ softens after BoC comments, awaits Fed
* C$ sags as low as 93.33 U.S. cents
* Focus on U.S. Federal Reserve announcement
By Jennifer Kwan
TORONTO, Sept 23 (Reuters) - Canada's currency was slightly lower against the U.S. dollar on Wednesday morning after a Bank of Canada official repeated the central bank's warning that the strong Canadian dollar is a risk to growth.
The currency weakened to C$1.0703 to the U.S. dollar, or 93.43 U.S. cents, shortly after the speech. It regained its footing before weakening off again to a session low of C$1.0715, or 93.33 U.S. cents.
In the prepared text of a speech, Deputy Governor David Longworth did not waver from language used in the central bank's Sept. 10 statement that "persistent strength in the Canadian dollar remains a risk to growth and to the return of inflation to target, and that the Bank retained considerable flexibility in the conduct of monetary policy at low interest rates." [ID:nN23387254]
The central bank's repetition of its it warning on the dollar should not come as a surprise to investors, as excluding it could be seen by some as a shift in their view, said Eric Lascelles, chief economics and rates strategist at TD Securities.
"We're so used to hearing some belly-aching and jaw boning with regard to Canadian dollar strength that an absence thereof suggests almost a carte blanche for a stronger currency," he said.
Separately, Bank of Canada Governor Mark Carney said late on Tuesday that Canada's economy has started the slow climb to recovery but only because of the emergency measures taken by the government and central bank, with business activity still lagging. [ID:nN22355648]
At 9:08 a.m. (1308 GMT), the currency was at C$1.0708 to the U.S. dollar, or 93.39 U.S. cents, slightly weaker than Tuesday's finish at C$1.0691 to the U.S. dollar, or 93.54 U.S. cents.
The currency's stall comes ahead of the U.S. Federal Reserve policy meeting, which ends later on Wednesday. Market watchers will look for the Fed to hold interest rates steady but will also want to know if it will soon unwind some stimulus programs due to a pickup in economic data.
"Today is really a waiting game for the FOMC and any hint that we get from their statement that their outlook is changing," said Camilla Sutton, currency strategist at Scotia Capital.
After the Fed, the focus turns to a meeting of the Group of 20 nations later this week. Among major issues expected to be discussed will be the need to examine strategies for withdrawing economic stimulus measures. [ID:nLH78576]
Canadian bond prices were lower across the curve, following the U.S. Treasury market where prices fell ahead of the Fed decision and in anticipation of U.S. issuance later in the session. [ID:nLN487968]
T-bill prices were little changed. The Bank of Canada said on Tuesday it will further scale back on providing extraordinary liquidity to money markets, the latest sign confidence is returning as the global financial crisis eases. [ID:nN22363926] (Editing by Jeffrey Hodgson)
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