CANADA FX DEBT-C$ firms as greenback falls, bonds mixed

Mon Oct 25, 2010 4:59pm EDT
 
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 * C$ rises, ends at 98.01 U.S. cents in light trade
 * Bond prices mixed
 * With G20 over, market focuses on coming FOMC meeting
 (Updates to close)
 TORONTO, Oct 25 (Reuters) - The Canadian dollar hit a
one-week high against a falling greenback on Monday, supported
by a broad move toward risker assets as commodity and equity
markets also rose.
 Canada's currency held firm all session as a lack of a
concrete currency agreement at the end of a Group of 20 finance
ministers meeting in South Korea on the weekend flashed a green
light to markets to keep selling the greenback ahead of next
week's U.S. Federal Reserve policy announcement.
 The market expects the Fed to ease monetary policy through
quantitative easing, or printing money to buy market assets.
 The weakness in the U.S. dollar translated into firmer
commodity prices, which typically benefit the Canadian dollar
because Canada is a net exporter of key resources.
 The Canadian dollar CAD=D4 ended at C$1.0203 to the U.S.
dollar, or 98.01 U.S. cents, up from C$1.0269 to the U.S.
dollar, or 97.38 U.S. cents, at Friday's close.
 "I think we'll just bat around off the moves in equities
and the (U.S.) dollar," said David Bradley, director of foreign
exchange trading at Scotia Capital.
 "We're trapped in this C$1.0150-C$1.0250 range for the time
being. Unless we get a bit of a breakout in the (U.S.) dollar
and stocks, then I don't see us moving out of this range for a
day or two."
 Liquidity in the Canadian dollar following the G20 meeting
gave the market a holiday-like feel, he said, and he did not
rule out a retest of parity against the U.S. dollar in the
short term.
 G20 finance ministers pledged on Saturday to move towards
market-determined exchange rates and to commit to a full range
of policies to reduce excessive external imbalances. But no
major policy initiatives emerged and the United States failed
in an attempt to push China to take steps to shrink its trade
surplus. [ID:nSGE69O00S] [FRX/]
 "We were left with a lot of a comforting words as opposed
to specific details. The market can move beyond that and focus
in on next week's (Federal Open Market Committee) meeting as
well as the election in the U.S.," said David Tulk, senior
macro strategist at TD Securities.
 "We're back to this pro-(quantitative easing) trade today
where everything is stronger but the U.S. dollar."
 Canada's data calendar is empty until Friday when
Statistics Canada releases August figures for GDP as well as
producer price data for September.
 But market participants expected trading would be fairly
light all week ahead of the Nov. 2-3 meeting of the Feds's
FOMC.
 "People in the market have been looking forward to this
FOMC meeting for a good number of months now. Waiting is the
hardest part," Tulk said.
 "It would take a lot to actually divert the market's
attention in the intermediate days between now and the FOMC."
 The policy-setting arm of the U.S. central bank is widely
expected to announce another round of asset purchasing to help
the anemic U.S. economy.
 Canadian government bonds prices were narrowly mixed,
tugged by firming stock indexes and anticipation of further
stimulus from the Fed.
 The two-year bond CA2YT=RR was unchanged to yield 1.391
percent, while the 10-year bond CA10YT=RR was off 4 Canadian
cents to yield 2.747 percent.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)