CANADA FX DEBT-C$ pares gains after Fed, still off 3-week low on oil
(Updates with reaction to Federal Reserve holding rates steady) * Canadian dollar at C$1.3178, or 75.88 U.S. cents * Bond prices lower across the maturity curve By Alastair Sharp TORONTO, Oct 28 (Reuters) - The Canadian dollar gave up most earlier gains against its U.S. counterpart on Wednesday after the Federal Reserve put a December U.S. interest rate hike firmly on the agenda, offsetting the impact of a bounce in crude oil prices. The U.S. central bank held rates steady as expected but surprised investors with an overt reference to its December meeting. "In this circumstance, with the Fed seemingly trying to get back in play, certainly you have to think in terms of the relative policy stances that the Fed is closer to normalising interest rates compared to the Bank of Canada," said Mazen Issa, senior foreign exchange strategist at TD Securities. The loonie, as the Canadian currency is colloquially known, weakened to above C$1.32 to the greenback after the news, from C$1.31 immediately before. It was at C$1.3178, or 75.88 U.S. cents, by 3:34 p.m. EDT (1934 GMT), still stronger than Tuesday's official close of C$1.3266, or 75.38 U.S. cents. It had earlier touched C$1.3281, or 75.30 U.S. cents, its weakest since Oct. 1. The commodity-linked currency had gained ahead of the Fed as a bump in chronically weak oil prices provided support. U.S. crude prices settled up 6.3 percent to $45.94 a barrel, while Brent added 4.7 percent to $49.05. The Canadian dollar was outperforming all of its key currency counterparts. Canadian government bond prices fell across the maturity curve, with the two-year price down 9.5 Canadian cents to yield 0.541 percent and the benchmark 10-year falling 46 Canadian cents to yield 1.469 percent. Canada-U.S. bond spreads widened after the Fed news, with the two-year bond spread at -16.6 basis points, and the 10-year spread at -62.1 basis points. (Editing by W Simon and James Dalgleish)
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