CANADA FX DEBT-C$ ends weaker, looks past Carney to Europe, Fed

Tue Sep 20, 2011 4:41pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

   * C$0.9936 vs US$, or $1.0064
 * Carney speech as expected, Europe weighs
 * Focus turns to FOMC outcome
 * Bond prices mostly lower
 (Updates to close, adds details, comment)
 By Andrea Hopkins
 TORONTO, Sept 20 (Reuters) - The Canadian dollar closed
weaker against its U.S. counterpart on Tuesday, weighed down by
worries over Europe and unaffected by a dovish speech by the
Bank of Canada chief.
 Global stocks and crude oil rose on expectations U.S.
Federal Reserve policymakers will act to boost the U.S.
economy. [MKTS/GLOB]
 But concern lingered about the outlook for Europe after
Standard & Poor's cut Italy's credit rating and the
International Monetary Fund said Europe's leaders were failing
to act decisively enough to resolve the crisis.
 "We are still very much in a range and I think that just
reflects the fact that investors are still primarily concerned
with events in Europe and that is the most important policy
implication even on Canada," said David Tulk, chief Canada
macro strategist at TD Securities.
 Markets have also turned their focus to the U.S. Fed, which
wraps up a two-day meeting of its Federal Open Market Committee
on Wednesday. The Fed set the stage for a program to buy
longer-dated bonds in a bid to keep already-low, long-term
interest rates low, if not lower. [FED/AHEAD]
 "The market is definitely a little sidelined until we get
some details from the Fed," said Shane Enright, executive
director of foreign exchange sales at CIBC World Markets.
 The Canadian dollar CAD=D4 ended the North American
session at C$0.9936 to the U.S. dollar, or $1.0064 U.S. cents,
down from Monday's North American session close of C$0.9897 to
the U.S. dollar, or $1.0104.
 In a speech in New Brunswick, Bank of Canada Governor Mark
Carney said external shocks are adding downside risks to the
Canadian economy, with euro zone fiscal funding challenges
affecting near-term confidence. [ID:nS1E78J116].
 The tone of the speech matched the cautious stance the bank
has taken lately.
 The Canadian dollar held at weaker levels against its U.S.
counterpart after Carney's speech and news conference before
dipping close to session lows in late trade.
 "He's basically preaching the same type of view that the
international outlook is quite bleak and conditions are
slightly more constructive within Canada, but ultimately there
is only a limited window in which Canada can outperform its
international peers," Tulk said.
 "Our view is that they would prefer to keep the policy rate
lower for longer and let fiscal stimulus provide any support in
the event the economy needs it."
 Canadian inflation data due at 7 a.m. (1100 GMT) on
Wednesday is expected to show a moderation in consumer price
rises as higher food prices are offset by more modest gasoline
 But because of a year-earlier drop in the CPI, the
year-on-year inflation rate is seen rising slightly to 2.9
percent. An unexpected jump in the rate could be mildly
supportive of the Canadian dollar and hurt bonds.
 Bond prices ended the day mostly lower.
 The two-year bond CA2YT=RR was down 2.5 Canadian cents to
yield 0.946 percent, while the 10-year bond CA10YT=RR was
down 15 Canadian cents to yield 2.201 percent. The price for
longer-data paper rose slightly in late trade.
 (Editing by Jeffrey Hodgson)