CANADA FX DEBT-C$ steady on benign CPI data; U.S. economy in focus

Fri Oct 18, 2013 4:40pm EDT
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* C$ at C$1.0294 vs US$, or 97.14 U.S. cents
    * Focus on Federal Reserve and U.S. economy after budget
    * Canadian inflation holds steady, as expected
    * Bond prices mostly higher across maturity curve

    By Leah Schnurr
    TORONTO, Oct 18 (Reuters) - The Canadian dollar was little
changed on Friday after a benign domestic inflation report and
as investors tried to gauge what impact of the recent U.S.
government shutdown would be on the world's largest economy.
    The uncertainty weighed on the greenback, though the
currency cut some of its earlier declines, and kept the loonie
largely to a narrow trading range. 
    A partial shutdown of the U.S. government, which was
resolved earlier this week, has raised concerns about how much
of a bite it will take out of the already fragile economic
recovery. That casts some uncertainty on Canada's economic
prospects, as the United States is Canada's largest trading
    Investors are also speculating that the impact from the
shutdown will see the Federal Reserve maintain the current pace
of its economic stimulus program for longer than had been
    On the domestic front, the loonie saw little reaction to
data that showed the annual inflation rate was unchanged in
September, leaving the Bank of Canada with plenty of room to
keep interest rates low. 
    "The Canadian dollar is going to be sidelined,
realistically, and I don't see us getting out of our recent
ranges," said John Curran, senior vice president at
    Curran sees the Canadian dollar staying within a range of
C$1.01 and C$1.06 for the remainder of the year.
    The Canadian dollar ended the North American
session at C$1.0294 versus the greenback, or 97.14 U.S. cents,
just a tad weaker than Thursday's close of C$1.0293, or 97.15
U.S. cents.
    The United States will be releasing economic reports that
were postponed by the shutdown over the coming weeks. Chief
among them will be September's unemployment report, which will
be released on Tuesday. 
    Canada's annual inflation rate was unchanged at 1.1 percent
in September and core inflation held at 1.3 percent, both under
the Bank of Canada's target rate of 2.0 percent, according to
Statistics Canada. 
    Markets will be turning their attention to next week's
interest rate decision from the Bank of Canada, but investors
expect the central bank will keep rates steady at 1 percent.
    The accompanying statement will likely be a bigger focal
point, with investors sensitive to any change in tone that might
indicate when the Bank will eventually raise rates.
    Government bond prices were mixed across the maturity curve
with the two-year bond off half a Canadian cent to
yield 1.180 percent and the benchmark 10-year bond 
adding 22 Canadian cents to yield 2.534 percent.