CANADA FX DEBT-Loonie at 3-year low before central bank decision

Wed Dec 4, 2013 9:23am EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ at C$1.0658 vs US$, or 93.83 U.S. cents
    * C$ hits fresh 3-year low with policy decision on tap
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Dec 4 (Reuters) - The Canadian dollar hit a
three-year low against the greenback on Wednesday as investors
bet that the Bank of Canada could take a more dovish tone when
it releases its policy decision later in the day.
    The currency has fallen in five of its last six sessions,
dropping through key support levels as bearish sentiment builds.
    The Bank of Canada will release its interest rate and policy
decision at 10:00 am ET (1500 GMT) following its first meeting
since a policy shift in October, when the central bank dropped
any mention of a rate hike.
    With the Bank of Canada seen as all but certain to hold
rates at 1 percent - where they have been since 2010 - investors
will be scrutinizing the statement for any change in tone.  
    "Given what we've seen with the Canadian dollar broadly over
the past couple weeks, I think it's pretty clear the market's
looking for some dovish confirmation from the Bank of Canada,"
said Greg Moore, FX strategist at TD Securities in Toronto.
    Moore said he is not expecting much of a change in tone from
the central bank.
    "The fact that at their last meeting they dropped the
tightening bias suggests there's not much more justification for
them to do more at this point. Since then, we really haven't
seen any stronger signals on the economy, domestic or global,
that would suggest otherwise," said Moore.
    "With that in mind, the market may be looking for a little
bit more dovishness than they'll get."
    Since the central bank's last meeting in October, the loonie
has lost more than 3 percent as the currency has also been
pressured by weak oil prices and prospects that the Federal
Reserve could begin winding down its economic stimulus sooner
rather than later.
    The recent policy shift pushed out market expectations for
the next rate hike into 2015. 
    The Canadian dollar was at C$1.0658 to the
greenback, or 93.83 U.S. cents, weaker than Tuesday's close of
C$1.0649 or 93.91 U.S. cents.
    The loonie traded as far as C$1.0678 overnight, its lowest
level since the beginning of July 2010. The low previously hit
this year in July at C$1.0609 had represented significant
support for the currency until the loonie broke through that
level late last week.
    Data earlier in the morning showed Canada unexpectedly
posted a trade surplus of C$75 million ($70.1 million) in
October, the first in 22 months. The Canadian dollar saw little
reaction to the data. 
    The two-year bond was off 2-1/2 Canadian cents to
yield 1.083 percent, while the benchmark 10-year bond
 fell 37 Canadian cents to yield 2.634 percent.