CANADA FX DEBT-C$ holds lower after Parliament suspended

Wed Dec 30, 2009 1:58pm EST
 
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 * C$ falls about 1 U.S. cent to 94.82 U.S. cents
 * Canada to suspend Parliament until after Olympics
 * Bond prices flat
 (Updates with details)
 TORONTO, Dec 30 (Reuters) - The Canadian dollar fell versus
a broadly stronger U.S. currency on Wednesday, backing further
away from a 2-1/2 month high hit in the previous session in
illiquid conditions.
 The currency held lower after news that Canadian Prime
Minister Stephen Harper is planning to have Parliament
suspended until early March. [ID:nTOD006123]
 "The currency has had a few adventures across the day, but
the political side of it doesn't seem to be the dominant focus.
The U.S. dollar is showing some strength today." said Eric
Lascelles, chief economics and rates strategist at TD
Securities.
 At 1:35 p.m. (1735 GMT), the Canadian dollar was at
C$1.0546 to the U.S. dollar, or 94.82 U.S. cents, down from
C$1.0438 to the U.S. dollar, or 95.80 U.S. cents, at Tuesday's
close. Earlier it had fallen to a one-week low at 94.53 U.S.
cents.
 The greenback gained across the board on Wednesday, hitting
its highest since late September against the Japanese yen as it
benefited from year-end flows in thin trade and from the view
the U.S. economy is on the road to recovery. [FRX/]
 After a technical point was triggered in the previous
session, market players took the Canadian currency to a high
not seen since Oct. 20 at 96.47 U.S. cents, but the move was
short-lived.
 "It was a little bit overdone. Expectations as to Canada
holding better levels sub-C$1.04 is probably unrealistic at
this point in time. There's not enough participants in the
market to support those levels just yet," said C.J. Gavsie,
managing director of foreign exchange sales at BMO Capital
Markets.
 "We do believe going forward into early to mid-January we
will retest those levels. If we do see them by the end of this
week it's only going to be on sharp flows that are probably
going to recoil."
 For the time being, the C$1.0450-C$1.05 range will likely
be a bit more of a "natural" level, he added. Thin trading
conditions will likely make for further exaggerated moves.
 With no major Canadian economic data on tap this week,
Canadian bond prices were little changed, much like their U.S.
counterparts after a seven-year U.S. bond auction. It was the
last leg of this week's three U.S. debt offerings totaling $118
billion.
 "You had a pretty decent auction in the U.S. but there's
nothing obviously driving markets at this time," said
Lascelles.
 The two-year Canadian government bond CA2YT=RR was off 1
Canadian cent at C$99.64 to yield 1.441 percent, while the
10-year bond CA10YT=RR fell 8 Canadian cents to C$101.02 to
yield 3.621 percent.
 (Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)