CANADA FX DEBT-C$ firms on China growth data; central bank eyed

Tue Oct 21, 2014 9:22am EDT
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* Canadian dollar at C$1.1214 or 89.17 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Oct 21 (Reuters) - The Canadian dollar firmed
against the greenback on Tuesday, boosted by
stronger-than-expected economic growth from China, but investors
were unlikely to place aggressive bets the day before a policy
statement was due from the Bank of Canada.
    China's economy grew 7.3 percent in the third quarter,
better than the 7.2 percent that had been forecast, but it was
still the slowest pace since the global financial crisis.
    The loonie is often sensitive to economic news out of China,
which is a major consumer of commodities, including oil.
    "The slight surprise to the upside has helped to put a bid 
under risk assets and the commodity-correlated currency space,"
said Scott Smith, senior market analyst at Cambridge Mercantile
Group in Calgary.
    The Canadian dollar was also helped by a return of risk
appetite to global markets after last week's rout on concerns
about the health of the world economy, said Smith.
    The Canadian dollar was at C$1.1214 to the
greenback, or 89.17 U.S. cents, stronger than Monday's close of
C$1.1284, or 88.62 U.S. cents.
    The week's main event, however, will be the monetary policy
statement from the Bank of Canada due on Wednesday. The bank
will also update its economic forecasts and is widely expected
to hold its key interest rate at 1 percent, where it has been
for four years.
    The central bank is seen likely to keep sending a cautious
message, particularly in light of last week's market turmoil,
even after data last week showed inflation in September was at
the bank's 2 percent target. 
    The currency pairing will likely be constrained to a tight
range heading into the bank's announcement, trading between
C$1.12 and the mid-C$1.12 area, said Smith.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 1-1/2 Canadian
cents to yield 0.973 percent and the benchmark 10-year
 down 24 Canadian cents to yield 1.964 percent.

 (Editing by Meredith Mazzilli)