CANADA FX DEBT-C$ slips against greenback despite Swiss move

Thu Jan 15, 2015 4:59pm EST
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* Canadian dollar at C$1.1964 to greenback, or 83.58 U.S.
    * Bond prices higher across the maturity curve

    By Alastair Sharp
    TORONTO, Jan 15 (Reuters) - The Canadian dollar weakened
slightly against its U.S. counterpart on Thursday, a slip offset
by the Swiss central bank's shock withdrawal of a cap on the
safe-haven franc.
    That set off frenzied trading across currency and other
markets, and obscured dismal domestic housing data and negative
sentiment about retailer Target's decision to exit Canada.
    "All else being equal, today would have been a poor day for
the Canadian dollar, but all wasn't equal. Today was an historic
day in the foreign exchange market," said Adam Button, a
currency analyst at ForexLive in Montreal.
    The Canadian dollar traced back early gains,
however, and ended the session at C$1.1964 to the greenback, or
83.58 U.S. cents, weaker than Wednesday's close of C$1.1945, or
83.72 U.S. cents.
    The Swiss move, which sent the franc soaring, initially
boosted commodities and prompted traders to scale back bets on a
further rise in the value of the greenback. 
    "The Swiss National Bank's move to effectively drop their
defense of the 1.20 euro/Swiss floor has created volatility,
which in turn is creating an environment that causes short crude
to come back, short commodity prices to come back," said Jack
Spitz, managing director of foreign exchange at National Bank
    "The (U.S.) dollar is faltering marginally, commodity
currencies are rising as commodity short positions are being
squared," he said. "The Canadian dollar has rallied on the back
of this."
    ForexLive's Button said the next risk for the loonie, as
Canada's currency is colloquially known, would be if the Bank of
Canada uses its quarterly monetary policy report next week to
raise the prospect of cutting interest rates amid slumping crude
    "If the Bank of Canada hints at a dovish bias, it will send
the market into a frenzy" that could put he C$1.25-1.30 range in
play, he said.
    Spitz said none of the fundamentals affecting the loonie had
changed with the Swiss news, and that any further gains would be
tied to a sustained rebound in crude prices. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 15 Canadian
cents to yield 0.812 percent and the benchmark 10-year
 was up C$1 to yield 1.465 percent, a record low.

 (Editing by Nick Zieminski and Grant McCool)