CANADA FX DEBT-C$ hits four-week high, then ends weaker as Fed holds

Thu Sep 17, 2015 4:20pm EDT
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(Adds comment after Fed decision, updates prices)
    * Canadian dollar at C$1.3174, or 75.91 U.S. cents
    * Bond prices higher across the maturity curve

    By Alastair Sharp
    TORONTO, Sept 17 (Reuters) - The Canadian dollar surged to
its strongest in four weeks before giving up the gains versus
its U.S. counterpart on Thursday after the Federal Reserve held
U.S. interest rates steady.
    In what amounted to a tactical retreat, the U.S. central
bank said an array of global risks and other factors had
convinced it to delay what would have been the first rate hike
in nearly a decade. 
    "If you take a look at the no move and the statement, the
projections, we see a pretty dovish Fed," said Bipan Rai,
director of foreign exchange strategy at CIBC World Markets.
    At one point the Canadian dollar hit C$1.3073, its strongest
since Aug. 21, while its weakest level was C$1.3205. It ended
the North American session trading hands at C$1.3174, or 75.91
U.S. cents, a tick weaker than Wednesday's close. 
    Global markets had been split on whether the Fed had seen
enough recovery to lift rates for the first time since 2006. 
    Rai said the Fed decision had likely not swayed the Bank of
Canada from its neutral stance after two rate cuts so far this
year, but that its policymakers may note that global woes, not
domestic slowdown, were the Fed's main worry.
    Taken as a whole, the latest Fed projections of slower GDP
growth, low unemployment and still low inflation suggest that
concerns of a so-called secular stagnation may be taking root
among Fed policymakers.
    Canadian government bond prices gained along the maturity
curve. The two-year added 7 Canadian cents to yield
0.491 percent and the benchmark 10-year added 44
Canadian cents to yield 1.547 percent.
    The Canadian currency fell against the euro, the Swiss franc
and the British pound but gained on fellow commodity currencies
including the Australian and New Zealand dollars.
    The price of oil, to which the loonie is typically sensitive
due to Canada's position as a major exporter of the commodity,
was little changed, with U.S. crude prices up 0.6 percent
to $47.42 a barrel and Brent crude flat at $49.73. 

 (Editing by W Simon and James Dalgleish)