CORRECTED-CANADA FX DEBT-C$ weakens to 1-1/2-month low, Fed in focus
(Corrects story from Oct 29 to show Bank of Canada said Poloz was referring to the change in the Canadian dollar, not in monetary policy when he spoke of "not a very significant change.") * C$ at C$1.0470 vs US$, or 95.51 U.S. cents * Market sets up for Fed statement on Wednesday * Canadian bond prices higher across the curve By Leah Schnurr TORONTO, Oct 29 (Reuters) - The Canadian dollar weakened against the greenback on Tuesday, extending its recent rout to hit a fresh 1-1/2-month low, but investors were wary of taking big bets with the U.S. Federal Reserve's two-day policy meeting underway. Markets also digested comments from the head of the Bank of Canada, who told a parliamentary committee that in setting interest rates last week the bank heightened its focus on the fact that inflation has been persistently below its 2 percent target. Governor Stephen Poloz said the Canadian dollar did not weaken significantly after the central bank dropped any mention of eventual rate increases from its latest policy statement last week. "He's firmly establishing his neutral position, which is warranted given where Canada finds itself from an economic perspective and the uncertainty globally," said Gareth Sylvester, director at Klarity FX in San Francisco. The bank's perceived shift in policy took the Canadian dollar lower last week as analysts pushed out their expectations for how long interest rates will stay low. Analysts said the bank has moved to a more neutral stance from its previous tightening bias. [CA/POLL The Canadian dollar ended the North American session at C$1.0470 versus the greenback, or 95.51 U.S. cents, weaker than Monday's close of C$1.0445, or 95.74 U.S. cents. The loonie's session low was C$1.0472, its lowest level since early September. The Fed will release a statement on Wednesday at the end of its meeting, with the market expecting the U.S. central bank to stand pat with its economic stimulus efforts. The Fed surprised markets in September with its decision to continue its bond-buying program at a $85 billion a month pace, rather than trimming the amount. The Canadian dollar touched a three-month high following that announcement, but has weakened since. "Obviously their communication style has come under some scrutiny since the decision in September to push off tapering, so we'll have an opportunity in terms of the statement to get a little more clarity in terms of what the Fed is really looking at," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto. Canadian government bond prices were higher across the maturity curve. The two-year bond rose half a Canadian cent to yield 1.091 percent, and the benchmark 10-year bond added 21 Canadian cent to yield 2.406 percent. (Editing by Peter Galloway)
© Thomson Reuters 2017 All rights reserved.