CANADA FX DEBT-C$ pushes higher on modest commodity gains

Tue Mar 29, 2011 5:14pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

   * C$ edges up to $1.0260
 * Bonds slide across curve as stocks gain
 * Markets focus on Fed's Bullard's comments
 (Updates to close)
 TORONTO, March 29 (Reuters) - The Canadian dollar pushed
higher against the U.S. currency on Tuesday, backed by modest
gains on equity and commodity markets, but its gain was limited
by hawkish comments by a U.S. Federal Reserve official.
 Oil prices, which often influence the direction of Canada's
commodity-linked currency, rose in thin technical trading on
lowered expectations about a quick return of Libya's
oil-exporting capabilities. [O/R]
 A pair of U.S. economic reports -- consumer confidence for
March and a survey of home prices in January -- were the latest
to suggest a loss in U.S. growth momentum early in the year,
but they also showed that the impact of high energy prices on
the U.S. economy should be temporary. [ID:nN29268691]
 "There was no strong momentum to take dollar/Canada higher
and with the data disappointment, there's been a move to more
or less cover some long U.S. dollar positions," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial.
 "With equities posting gains and commodities starting to
pick up again, the market is comfortable long commodity
currencies."
 The Canadian currency CAD=D4 closed at C$0.9747 to the
U.S. dollar, or $1.0260, up from Monday's North American finish
of C$0.9766 to the U.S. dollar, or $1.0240.
 The U.S. economic data didn't have as much impact as
comments by Fed President James Bullard.
 Bullard said on Tuesday that 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. The market
took that as meaning that higher U.S. interest rates may come
sooner than expected.
 Bullard's comments were stronger than the dovish remarks
made by other Fed officials on Monday, and were more in line
with central bank statements made on Friday. [ID:nN25260798]
[ID:nN28221312] [ID:nLDE72S0RJ] [FRX/]
 "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," said Steve Butler, director of foreign exchange
trading at Scotia Capital.
 BONDS DOWN
 Canadian government bond prices were lower across the curve
in sympathy with their U.S. counterparts as firmer equity
markets and the hawkish U.S. central bank talk took center
stage.
 The interest rate-sensitive two-year bond CA2YT=RR was 8
Canadian cents lower, yielding 1.794 percent, while the 10-year
bond CA10YT=RR lost 27 Canadian cents to yield 3.304
percent.
 Late in the afternoon, Ontario's Liberal government said
that a tight cap on spending growth will keep the country's
most populous province, and the one with the biggest economy,
on track to eliminate its budget deficit by 2017-18.
[ID:nN29293456]
 The Ontario government said its net debt would rise to
C$241.5 billion in 2011-12, up from C$217.3 billion in 2010-11.
By 2014-15, Ontario's debt to GDP ratio is seen peaking to
almost 41 percent. It also said it would look to the domestic
market to meet most of the next year's borrowing needs.
[ID:nN2929486]
 (Additional reporting by Solarina Ho; editing by Peter
Galloway)