CANADA FX DEBT-C$ firms, but weakness seen on horizon
By Alastair Sharp TORONTO, Nov 6 (Reuters) - The Canadian dollar firmed slightly against the U.S. dollar in subdued trade on Wednesday, but is seen weakening in coming weeks and months as bond yields likely slip back towards those of its southern neighbor and main trading partner. At 9:42 a.m. (1442 GMT) the Canadian dollar was trading at C$1.0440 to the greenback, or 95.79 U.S. cents, compared with C$1.0458, or 95.62 U.S. cents, at Tuesday's North American close. "Today there are a couple of Canadian data points that are perhaps interesting to watch but probably not all that influential for the Canadian dollar," said Greg Moore, currency strategist at TD Securities. Increased plans for housing construction helped edge the value of Canadian building permits up by 1.7 percent in September after permits were whipsawed by a gain and loss of more than 20 percent in July and August. Separately, the pace of purchasing activity in Canada jumped in October, with supplier deliveries returning to growth, according to Ivey Purchasing Managers Index data released on Wednesday. In a Reuters poll released on Wednesday, the currency was seen slipping to C$1.06 a year from now as the combined effect of tighter future U.S. monetary policy and no imminent rate hikes in Canada take hold. While much attention in coming weeks will be on whether the U.S. Federal Reserve will start to trim back its monetary stimulus, Moore said the Bank of Canada's recent dropping of a rate-hike bias would likely cause weakness in the Canadian currency as short-term bond yield spreads tighten. "The Canadian yield advantage is on an eroding trend and that should continue perhaps a little more sharply after the messaging we heard in the past couple of weeks," he said. The two-year bond was up 1.5 Canadian cents to yield 1.123 percent, while the benchmark 10-year bond rose 8 Canadian cents to yield 2.527 percent.
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