CANADA FX DEBT-C$ firms as investors book greenback profits

Thu Oct 2, 2014 9:51am EDT
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* Canadian dollar at C$1.1134 or 89.81 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Leah Schnurr
    TORONTO, Oct 2 (Reuters) - The Canadian dollar firmed
against the greenback on Thursday, recovering some of its recent
losses, but analysts expect the move to be short-lived with the
currency likely to see further declines.
    Several factors have been pulling the loonie lower but the
major driver has been the U.S. dollar's ongoing strength as the
U.S. economy picks up and the Federal Reserve moves closer to
raising interest rates.
    Movements in the greenback continued to steer the Canadian
dollar on Thursday with a U.S. dollar retreat giving the loonie
some breathing room. 
    Investors were taking profits in the greenback as they
watched the head of the European Central Bank give a press
conference and ahead of Friday's U.S. jobs report, said Scott
Smith, senior market analyst at Cambridge Mercantile Group in
    "With the runup we've seen in the U.S. dollar, it's key to
see a bit of the froth come off the top and that's been driving
the crosses, so we're seeing the loonie getting a bit of
    The Canadian dollar was at C$1.1134 to the
greenback, or 89.81 U.S. cents, stronger than Wednesday's close
of C$1.1172, or 89.51 U.S. cents. The loonie climbed to a
session high of C$1.1071 in the overnight session, its firmest
level in a week.
    After weakening earlier, the euro firmed against the
Canadian dollar as the ECB's Mario Draghi outlined the central
bank's plans to buy secured debt. 
    Smith said the Canadian dollar is likely to resume its
downward path as soon as the U.S. dollar picks up momentum
again, but that much of the near-term action will depend on how
the U.S. jobs report and Canadian export data look on Friday. 
    The currency pairing could break sustainably through C$1.12
if the jobs data comes in strong following a disappointing
August figure, and if the Canadian data is soft, Smith said.
    "The risk with tomorrow is potentially another weak jobs
report out of the U.S. and we may not have the steam to make
another run at C$1.12."
    Canadian government bond prices were mostly lower across the
maturity curve, though the two-year was up half a
Canadian cent to yield 1.113 percent, while the benchmark
10-year was down 10 Canadian cents to yield 2.082

 (Editing by Peter Galloway)