CANADA FX DEBT-C$ firms as Fed comments digested. bonds mixed
* C$ firms to C$0.9763, or $1.0243
* Bonds mixed across the curve
* Market split over hawkish Fed comments
By Solarina Ho
TORONTO, March 29 (Reuters) - The Canadian dollar was marginally stronger on Tuesday against the U.S. currency, which weakened after expectations for a euro-zone rate hike pushed the euro higher, but gains were capped following hawkish comments from the U.S. Federal Reserve.
Fed President James Bullard said on Tuesday the U.S. central bank may normalize monetary policy before global uncertainties like the aftermath of the Japanese tsunami and earthquake and violence in the Middle East and North Africa were resolved.
Bullard's comments were stronger than the dovish remarks made by other Fed officials on Monday, but were more in line with central bank statements made on Friday. [ID:nN25260798] [ID:nN28221312] [ID:nLDE72S0RJ] [FRX/]
"The members of the FOMC have been very consistent in the message that the end of QE2 is coming. And obviously, the question is, what exactly is that going to mean for Canada with commodity prices coming off a little bit?" said Steve Butler, director of foreign exchange trading at Scotia Capital.
He noted the market has been split about Canada. A stronger economy in the United States -- the country's biggest trading partner -- benefits the Canadian economy.
"That's probably offsetting a little bit of the weaker commodity story ... It's still a while before the Fed does anything, but I certainly think the hawkish comments are being taken to heart by the market," Butler said.
Oil prices, which often influence the direction of the commodity-linked currency, have come off recent highs as expectations increased that crude supplies in Libya would be restored quickly. U.S. crude prices remained above $100, however. [O/R]
At 8:22 a.m. (1322 GMT), the currency CAD=D4 stood at C$0.9763 to the U.S. dollar, or $1.0243, up from Monday's North American finish of C$0.9766, or $1.0240.
Comments over the weekend by Bank of Canada Governor Mark Carney that hinted that rate hikes, while not imminent, were on the horizon also kept the Canadian dollar from losing too much steam, Butler added.
With no Canadian economic data to drive direction, the currency could derive some movement on U.S. data and is seen trading between C$0.9720 on the resistance side and over C$0.9800 on the support side.
Canadian government bond prices were mixed across the curve. The interest rate-sensitive two-year bond CA2YT=RR was 1 Canadian cent higher, yielding 1.760 percent, while the 10-year bond CA10YT=RR lost 6 Canadian cents to yield 3.277 percent.
"The bond market is kind of like FX market -- swinging in the wind a little bit, based on the latest headlines and the latest sentiment," Butler said. (Reporting by Solarina Ho; Editing by Jan Paschal)
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