CANADA FX DEBT-C$ stronger as central bank keeps rate hike in view

Tue Oct 23, 2012 9:45am EDT
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* C$ at C$0.9902 versus the US$, or or $1.0099

* Bank of Canada largely holds to hawkish line on rates

* Global weakness offsets C$ gains vs US$

By Alastair Sharp

TORONTO, Oct 23 (Reuters) - The Canadian dollar sharply strengthened versus the U.S. currency on Tuesday after the Bank of Canada largely retained its hawkish view that interest rates should be raised over time.

The currency had been weakening ever since the governor of the central bank had omitted reference to a tightening bias in a speech a week ago, but reversed course after the bank only slightly toned down its rate hike bias and flagged household debt as a concern.

"Obviously they kept the hawkish bias, which I think took the markets by surprise, so we've had a rally in the Canadian dollar," said Camilla Sutton, chief currency strategist at Scotiabank.

The currency traded as strong as C$0.9902 to the greenback, or $1.0099, after the central bank statement, compared with C$0.9970, or $1.0030 just before. It had closed Monday's North American session at C$0.9926, or $1.0075.

The move was partly muted as investors globally have flocked to the safe haven U.S. dollar after lacklustre corporate earnings and a downgrade of Spanish regions re-ignited fears about the health of the world economy.   Continued...