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