CANADA FX DEBT-C$ marginally stronger as Fed remains focus

Wed Nov 13, 2013 9:34am EST
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* C$ at C$1.0486 vs US$, or 95.37 U.S. cents
    * Prospect of less U.S. stimulus weakens loonie

    TORONTO, Nov 13 (Reuters) - The Canadian dollar firmed
marginally versus the U.S. currency  in early trade on
Wednesday, but the effect of domestic catalysts was muted amid
heightened anticipation that the U.S. Federal Reserve may soon
trim its monetary stimulus.
    The loonie has weakened by two cents in recent weeks after
the Bank of Canada dropped its mild rate-hiking bias and decent
economic data out of the United States raised expectations the
Fed will move to tighten its monetary policy.
    A top U.S. central banker on Tuesday said the Fed could
reduce the pace of its monthly asset purchases at a Dec. 17-18
policy meeting.    
   Canada meanwhile is in better fiscal health than previously
thought, the Conservative government said on Tuesday, predicting
it would run a sizeable budget surplus in time for the 2015
federal election. 
    "What's most interesting is we have one of the first
governments among the Western economies announcing a surplus in
a couple of years and it doesn't really seem to do anything
positive for the currency," said Don Mikolich, executive
director for foreign exchange sales at CIBC World Markets.
    At 9:08 a.m. (1408 GMT) the Canadian dollar was
trading at C$1.0486 to the greenback, or 95.37 U.S. cents,
compared with C$1.0493, or 95.30 U.S. cents, at Tuesday's North
American close.
    "It goes to show how transfixed the market is on the
potential of Fed tapering as early as December," Mikolich said. 
    The two-year bond was up one and a half Canadian
cents to yield 1.132 percent, while the benchmark 10-year bond
 rose 9 Canadian cents to yield 2.636 percent.
    Mikolich said he expected the currency to trade between
C$1.0420 and C$1.0535 during the session, and for a similar
range to be maintained through the end of the week.