CANADA FX DEBT-C$ firms on U.S. data, rethink of Fed stance

Thu Sep 18, 2014 9:55am EDT
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* Canadian dollar at C$1.0964 or 91.21 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Sept 18 (Reuters) - The Canadian dollar firmed
against the greenback on Thursday as investors reassessed the
previous day's policy statement from the U.S. Federal Reserve,
while markets globally were bracing for the results of
Scotland's independence referendum.
    The loonie was also supported by weak housing data south of
the border, as well as data at home that showed foreign
investors resumed buying Canadian securities in July.
    The currency recovered much of the ground lost in a selloff
the previous session that was sparked by a Fed indication that
it could move at a faster pace than expected once it starts
raising interest rates, even as it repeated that rates will stay
low for a "considerable time". 
    Currency markets had focused on the Fed's rate projections
on Wednesday, but they were giving that a rethink on Thursday.
    "I think the rate and currency markets essentially looked
too much into the dot charts and the increase in hawkishness for
interest rate projections, whereas when you look at the
statement, (Fed Chair Janet) Yellen and the voting members were
still dovish," said Scott Smith, senior market analyst at
Cambridge Mercantile Group in Calgary.
    "To some extent, we could see a little pullback in U.S.
dollar-Canadian dollar just on the fact that the run-up
yesterday was a little overdone when you weigh everything."
    The Canadian dollar was at C$1.0964 to the
greenback, or 91.21 U.S. cents, stronger than Wednesday's close
of C$1.1004, or 90.88 U.S. cents.
    The British pound firmed against the loonie on
investor hopes that Scotland would not choose to abandon its
union with England. The result of the vote is not expected until
early on Friday. 
    "One thing that could hem in the pound a bit, so that it
doesn't rally too far, is if there is a small 'no' majority, it
could likely be a situation like what we had in Canada with
Quebec, where an independence referendum is always in the back
of a competing party's mind," Smith said.
     Canadian government bond prices were lower across the
maturity curve, with the two-year off 2 Canadian
cents to yield 1.177 percent and the benchmark 10-year
 down 13 Canadian cents to yield 2.284 percent.

 (Editing by Peter Galloway)