CANADA FX DEBT-C$, bonds firm in light trade with eyes on Fed
* C$ firms to $1.0506
* Bonds mostly firmer ahead of Fed view
By Solarina Ho
TORONTO, April 26 (Reuters) - The Canadian dollar edged higher against its struggling U.S. counterpart in quiet trading on Tuesday, with traders focused on Wednesday's appearance by U.S. Federal Reserve Chairman Ben Bernanke.
The U.S. dollar was weighed down by expectations the central bank will be reluctant to tighten monetary policy. Investors are also keen to parse Bernanke's comments after the Federal Open Market Committee concludes its meeting on Wednesday. [ID:nN1941922] [FRX/]
"The market's really just waiting for the FOMC tomorrow, to see if there's any new news out there," said David Bradley, director of foreign exchange trading at Scotia Capital, noting that other currencies have been quiet as well.
"If it's more hawkish, it'll just give the Bank of Canada more leeway in raising rates up here as well. I don't think it's going to be negative for the currency."
Bradley added that traders were still mostly long the Canadian dollar.
The Fed appears set to reaffirm its plan complete its $600 billion bond-buying program in June, with no rush to exit amid a backdrop of weak housing markets, softer-than-expected economic data and possible austerity measures to tackle the budget deficit.
The Bank of Canada, meanwhile, is expected to hike its key policy rate from its current 1 percent level sometime this year. Most primary dealers expect the first move of the year to fall in July. [CA/POLL]
Canada's higher interest rates have helped attract international capital flows and boosted the Canadian dollar.
The currency CAD=D4 finished the session at C$0.9518 to the U.S. dollar, or $1.0506, stronger than Monday's North American finish of C$0.9546, or $1.0476.
The commodity-linked currency shifted within a tight range along with movements in riskier assets like gold and oil, a key Canadian export. Crude prices edged higher in volatile trading, while bullion slipped ahead of the outcome of the FOMC.
Also attracting some attention was news of the left-leaning New Democratic Party's move into second place in polls ahead of a federal election. [ID:nN26285152]
The party's surge in popularity has yet to dissuade Canadian dollar bulls, said RBC Capital Market's David Watt, a senior fixed income and currency strategist.
But Watt added that if the trend holds, "what-if scenarios will get increasing attention, ahead of, and potentially after election day."
Canadian bond prices were mostly firmer ahead of Bernanke's news conference, mirroring moves in U.S. Treasuries. [US/]
The two-year bond CA2YT=RR was up 7.5 Canadian cents to yield 1.737 percent, while the 10-year bond CA10YT=RR added 37 Canadian cents to yield 3.194 percent. (Editing by Jeffrey Hodgson)
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