CANADA FX DEBT-C$ softens after BoC comments, awaits Fed

Wed Sep 23, 2009 9:17am EDT
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 * 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
 "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
 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.
 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
 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.
 (Editing by Jeffrey Hodgson)