Canadian dollar ends higher as data hits greenback

Tue Jun 24, 2008 4:36pm EDT
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 * Canadian dollar benefits from weaker greenback
 * Wednesday's U.S. Federal Reserve decision in focus
 * Bond prices resume rally from last week
 TORONTO, June 24 (Reuters) - The Canadian dollar closed
higher on Tuesday as weak U.S. data weighed on the greenback,
but its move was limited ahead of the rate decision from the
Federal Reserve due on Wednesday.
 Domestic bond prices, with no Canadian data to consider,
followed the bigger U.S. Treasury market to a higher close
after weak data from south of the border provided more evidence
for the view that the Fed would hold off on any increase in
interest rates for some time.
 The Canadian dollar closed at C$1.0115 to the U.S. dollar,
or 98.86 U.S. cents, up from C$1.0158 to the U.S. dollar, or
98.44 U.S. cents, at Monday's close.
 The domestic currency spent the quiet session in a tight
range as traders avoided huge commitments until after the U.S.
Federal Open Market Committee rate decision and, to a larger
extent, its accompanying statement.
 The market, which largely expects no change to the Fed's
key rate, wants to see if the central bank offers any clues as
to their future bias towards interest rates.
 "The Canadian dollar is tracking a little bit higher here
but I don't think there is a whole lot of conviction as people
are generally still waiting for the FOMC," said Shaun Osborne,
chief currency strategist at TD Securities.
 "Until there is a story that differentiates Canada from
whatever else is going on in the U.S., we are probably going to
see this range trading continue."
 The commodity-linked Canadian dollar was also supported by
a rise in oil prices, but the impact was muted as oil settled
below its session high comfortably below the record near $140 a
barrel reached last week.
 Canadian bond prices finished higher after U.S. data showed
consumer confidence fell to a 16-year low while another report
showed housing prices in 20 major metropolitan areas declined
by 15.3 percent in the year to April.
 Given the lack of any Canadian data to set a tone, the U.S.
reports were enough to offer a bid to Canadian government debt
and build on last week's rally.
 "They're feasting on the weak data from both confidence and
home prices in the U.S. which are both sliding pretty fast,"
said Sal Guatieri, senior economist at BMO Capital Markets.
"It's possible the that the confidence numbers in part could
sway the more dovish Fed numbers to back a more neutral policy
bias instead of a tightening bias tomorrow."
 The two-year bond rose 12 Canadian cents to C$100.94 to
yield 3.243 percent. The 10-year bond gained 75 Canadian cents
to C$102.10 to yield 3.721 percent.
 The yield spread between the two-year and 10-year bond was
47.8 basis points, down from 47.1 at the previous close.
 The 30-year bond added C$1.58 to C$115.88 for a yield of
4.062 percent. In the United States, the 30-year Treasury
yielded 4.636 percent.
 The three-month when-issued T-bill yielded 2.72 percent, up
from 2.70 percent at the previous close.