CANADA FX DEBT-C$ slips as investors await Fed, Obama

Wed Jan 27, 2010 12:45pm EST
 
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 * Slips to 93.84 U.S. cents
 * Bond prices firm on safety bid
 By Ka Yan Ng
 TORONTO, Jan 27 (Reuters) - The Canadian dollar was softer
against the U.S. dollar on Wednesday, though off session lows,
as mixed commodity and equity markets provided little direction
and investors were reluctant to make big bets ahead of an
interest rate decision by the U.S. Federal Reserve.
 The price for oil, a key Canadian export, was little
changed at around $74.85 a barrel [O/R], while gold prices were
slightly lower. [GOL/]
 Global stock markets fell on Wednesday, hitting their
lowest levels in two months as investors fretted about a
monetary squeeze by central banks around the world and also the
impact of tighter U.S. banking regulation. [MKTS/GLOB]
 At 12:13 p.m. (1713 GMT), the Canadian dollar was at
C$1.0656 to the U.S. dollar, or 93.84 U.S. cents, down slightly
from Tuesday's finish at C$1.0625 to the U.S. dollar, or 94.12
U.S. cent. Earlier, the currency had fallen as low as 93.65
U.S. cents.
 Market watchers said the policy and political landscape
would likely keep investors cautious, and could put some spring
into the U.S. dollar as risk aversion rises, to the detriment
of the Canadian dollar.
 The Fed is widely expected to leave its key interest rates
near zero, but investors will watch for any change in the
accompanying statement on the economic outlook, or on when
rates might rise. Questions are also overhanging whether Ben
Bernanke will win a second term as chairman of the U.S. central
bank. [ID:nN27180815]
 "The big interesting question is less over this meeting and
more over who's going to be in the chairman's chair ... It
looks like it'll probably be Bernanke but it still indicates a
clear tension between Congress and the Fed," said David Watt,
senior currency strategist at RBC Capital Markets.
 "We've already got a lot of nervousness in markets and it
could just feed into that, which actually could turn out being
U.S. dollar bullish so that could push dollar/Cad somewhat
higher."
 U.S. President Barack Obama's State of the Union address on
Wednesday evening will also be closely watched.
 BONDS FIRM
 Government bond prices were firm across the curve, catching
a safe haven bid in the wake of jitters over Greece's fiscal
health [ID:nLDE60Q0Y4] and an unexpected drop in U.S. new home
sales.
 Sales of new homes fell 7.6 percent in December, although
November sales were revised to a stronger number than initially
reported, according to U.S. data. [ID:nCAT005052]
 Investors were also waiting for the outcome of the Federal
Reserve's interest-rate meeting and an $42 billion auction of
five-year U.S. paper.
 In Canada, an auction of two-year bonds due 2012 yielded an
average 1.301 percent. [ID:nTOR007129]   [CA/AUC]
 The two-year bond CA2YT=RR was up 2 Canadian cents at
C$100.17 to yield 1.159 percent, while the 30-year bond
CA30YT=RR rose 68 Canadian cents to C$117.70 to yield 3.937
percent.
 (Additional reporting by Jennifer Kwan; editing by Rob
Wilson)