CANADA FX DEBT-C$ firms to 1-month high as Summers ends Fed bid
* C$ at C$1.0325 vs US$ or 96.85 U.S. cents * U.S. dollar hit by Summers exit from race to lead Fed * Canadian bond prices mixed By Alastair Sharp TORONTO, Sept 16 (Reuters) - The Canadian dollar ended stronger against its U.S. counterpart on Monday and touched a one-month high during the session after former U.S. Treasury Secretary Lawrence Summers withdrew from the race to head up the U.S. central bank. The announcement over the weekend took the U.S. dollar broadly lower as investors perceived the U.S. Federal Reserve would take a more gradual path to tightening monetary policy with Summers out of the picture. "Market perception, rightly or wrongly, was that Summers would be more hawkish than (current Chairman Ben) Bernanke or (leading contender Janet) Yellen or other possible candidates," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets. "The prospect of having more stimulus for longer is more likely without him in the race," he said. The question of when the Fed will start to pull back on its economic stimulus program will be the focus of its two-day policy meeting, which ends on Wednesday. Investors expect the Fed will reduce its $85 billion a month in bond purchases by $10 billion a month. The Canadian dollar ended the day at C$1.0325 to the U.S. dollar, or 96.85 U.S. cents, stronger than Friday's session close of C$1.0347, or 96.65 U.S. cents. The currency hit its strongest level since Aug. 12 during the session before paring gains. CIBC's Mikolich said that C$1.0280 level could prove difficult to push through in the near term. The greenback was 0.2 percent lower against a basket of currencies on Monday. The Canadian dollar barely reacted to data that showed foreigners resumed buying Canadian securities in July after a huge divestment in June. Data released last week that showed the ratio of household debt to income in Canada hit a record high in the second quarter could be a long-term positive for the loonie if it prompts a tightening of Bank of Canada policy, said Camilla Sutton, chief currency strategist at Scotiabank. "This reopens the risk that the Bank of Canada turns to a more hawkish stance," she said. The ratio of household debt to income rose to 163.4 percent in the second quarter from 162.1 percent in the first quarter. Prices for Canadian government bonds were mixed across the maturity curve, with the two-year bond up 2-1/2 Canadian cents to yield 1.269 percent, and the benchmark 10-year bond falling 22 Canadian cents to yield 2.794 percent.
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