CANADA FX DEBT-C$ weaker ahead of data, BoC decision this week

Mon Oct 21, 2013 4:45pm EDT
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* C$ at C$1.0301 vs US$, or 97.08 U.S. cents
    * Wholesale trade rises 0.5 percent in August
    * Bond prices lower across maturity curve

    By Leah Schnurr
    TORONTO, Oct 21 (Reuters) - The Canadian dollar weakened on
Monday with investors wary of taking bets ahead of key data
reports on both sides of the border this week and an interest
rate decision in Canada. 
    Economic data reports delayed by this month's partial U.S.
government shutdown will be released in the coming weeks. One of
the most important for markets, the unemployment report for
September, will be released on Tuesday. At home, investors will
also take in Canadian retail sales for August.
    The shutdown has raised concerns about how much of a bite it
will take out of the already fragile U.S. economic recovery.
That casts some uncertainty on Canada's economic prospects, as
the United States is the country's largest trading partner.
    Beyond trying to determine the strength of the U.S.
recovery, investors are also speculating about what that means
for how long the Federal Reserve will maintain the current pace
of its economic stimulus efforts.
    The U.S. non-farm payrolls report is forecast to show the
economy created 180,000 jobs last month. Still, the delay has
prompted questions about whether there will be any distortions
in the data, and a figure that is outside of the consensus may
not elicit much market reaction, said Don Mikolich, executive
director of foreign exchange sales at CIBC World Markets.
    "People need to be constantly fed a diet of good economic
numbers before they change their view on things," said Mikolich.
    "To get nice, clear numbers will take now a month or two
before we can get what we'll call a clean set of data to really
focus in on how the recovery is going."
    The Canadian dollar ended the North American
session at C$1.0301 versus the greenback, or 97.08 U.S. cents,
weaker than Friday's close of C$1.0294, or 97.14 U.S. cents.
    The loonie is likely to trade in a narrow band, from about
C$1.0260 to C$1.0315, said Mikolich. 
    Investors were also staying on the sidelines ahead of an
interest rate decision from the Bank of Canada, due on
Wednesday. The central bank is expected to 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.
    "The Bank of Canada has held a relatively hawkish tightening
(bias) over the last few statements," said Scott Smith, senior
market analyst at Cambridge Mercantile Group in Calgary.
    "The risk is we start to see a little softening of language
on the Bank of Canada side of things and maybe looking toward
more of an emphasis on boosting export growth and holding off on
interest rates until we see that slack removed from the
    Government bond prices were lower across the maturity curve
with the two-year bond off 3-1/2 Canadian cents to
yield 1.198 percent and the benchmark 10-year bond 
falling 17 Canadian cents to yield 2.551 percent.