CANADA FX DEBT-C$ falls, bonds rise, Q3 GDP eyed

Tue Nov 30, 2010 8:11am EST
 
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   * C$ slips to 97.88 U.S. cents
 * Bonds track U.S. Treasuries higher in safe haven bid
 * Market focus on Canada GDP for Sept, Q3 due at 1330 GMT
 TORONTO, Nov 30 (Reuters) - The Canadian dollar was
slightly lower against the U.S. currency on Tuesday morning
ahead of key economic growth data that may help determine next
week's Bank of Canada interest rate decision.
 Markets will zero in at 1330 GMT on Canadian economic
growth data for September and the third quarter, the first of
two major reports this week, but broad external factors such as
euro zone debt woes will likely be the dominant influence on
trading. ECONCA [ID:nN26127869]
 Third-quarter economic growth is expected to slow further,
likely to reflect the cautious external sector, with exports
and manufacturing still soft.
 The data, along with this Friday's employment report for
November, will be the last critical pieces of information that
will help determine the Bank of Canada's next monetary policy
decision on Dec. 7.
 Market pricing already suggests that the central bank is
unlikely to change interest rates next week. According to a
Reuters calculation of yields on overnight index swaps, which
reflect expectations for the policy rate, there is nearly 96
percent likelihood that the bank will stand pat. BOCWATCH
 "The effect of any economic data will be minimal as they
will be overshadowed by the big macro and geopolitical events,"
said Michael O'Neill, managing director at Knightsbridge
Foreign Exchange. He pointed to euro zone contagion fears and
ongoing developments in North Korea, which boasted advances in
its nuclear programme. [ID:nTOE6AT029] [nTOPNOW6]
 Meantime, the Canadian dollar was under some pressure as
its risk barometers, as measured by the price of crude and
equity market futures, were lower. Uneasiness surrounding euro
zone debt problems also remained.
 U.S. data may also be influential as the health of the U.S.
economy is crucial to Canada's fortunes due to the huge trading
link between the two countries. On tap on Tuesday is the
Conference Board's index of U.S. consumer attitudes for
November, as well as the S&P Case Shiller home price index for
September.
 O'Neill said the Canadian dollar would likely stick within
its recent ranges, and put the daily trading band between
C$1.0160-C$1.0250.
 At 7:48 a.m. (1248 GMT), the Canadian dollar CAD=D4 was
at C$1.0217 to the U.S. dollar, or 97.88 U.S. cents, down from
C$1.0186 to the U.S. dollar, or 98.17 U.S. cents, at Monday's
close.
 Domestic government bonds were higher in a flight-to-safety
bid, tracking U.S. Treasuries, as Europe's fiscal crisis
weighed.
 The two-year government of Canada bond CA2YT=RR was up 5
Canadian cents to yield 1.635 percent, while the 10-year bond
CA10YT=RR rose 28 Canadian cents to yield 3.051 percent.
 (Reporting by Ka Yan Ng, Editing by Chizu Nomiyama)