CANADA FX DEBT-C$ firms broadly as markets remain choppy

Wed Aug 26, 2015 4:51pm EDT
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(Updates with closing figures, strategist comment, details)
    * Canadian dollar at C$1.3315 or 75.10 U.S. cents
    * Bond prices lower across the maturity curve

    By Solarina Ho
    TORONTO, Aug 26 (Reuters) - The Canadian dollar firmed
against the greenback on Wednesday, and led its commodity
counterparts in outperforming key currencies, as investors
dipped their toes back into riskier assets.
    The move came as some calm took hold in currency markets and
North American equity markets rallied on upbeat data and Federal
Reserve comments following a volatile start to the week on
worries about China's economic growth.  
    The loonie's strength came even as the U.S. dollar rebounded
and the price of crude, a major Canadian export, fell nearly 2
percent, rupturing the currency's usually tight correlation with
oil and the greenback. 
    "It's been a bit of a puzzler for us too. It's the best
performing still of the majors against the U.S. dollar today,"
said Mark Chandler, head of Canadian fixed income and currency
strategy at RBC Capital Markets.
    "In the last couple of days, it's been trading more as a
risk proxy, so when the U.S. dollar and equity markets are
bouncing, Canada has been typically outperforming ... trading
closer with equities markets, which is unusual for the Canadian
dollar. It's something that we don't expect to last."
    The Canadian dollar finished trading at C$1.3322 to
the greenback, or 75.06 U.S. cents, modestly stronger than the
Bank of Canada's official close of C$1.3346, or 74.93 U.S. cents
on Tuesday.
    The currency traded between C$1.3252 and C$1.3350 throughout
the session, as external drivers dictated the loonie's direction
in the absence of domestic economic data this week.
    In the United States, a gauge of U.S. business investment
plans in July posted its largest increase in just over a year,
underscoring the durability of the economic recovery despite a
slowing global economy. 
    Comments by a Federal Reserve official also indicated that
the recent global market turmoil made a September interest rate
hike less likely. 
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year price down 8
Canadian cents to yield 0.392 percent and the benchmark 10-year
 falling C$1.11 to yield 1.447 percent.
    The Canada-U.S. two-year bond spread narrowed to -28.8 basis
points, while the 10-year spread narrowed to -73.5 basis points.

 (Reporting by Solarina Ho; Editing by Meredith Mazzilli and
David Gregorio)