CANADA FX DEBT-C$ holds near multiyear lows in rate cut aftermath
* Canadian dollar at C$1.2929 or 77.35 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, July 16 (Reuters) - The Canadian dollar extended its weakness against its U.S. counterpart on Thursday, the day after the currency plunged to lows not seen since March 2009 after the Bank of Canada cut its key interest rate for the second time this year. Adding to the pressure was the U.S. dollar's trading near 1-1/2 month highs against a basket of key currencies, with the U.S. Federal Reserve this week reiterating its intention to raise interest rates sometime this year, a move that stands in sharp contrast to Canada's. "The (Canadian) dollar reacted quite violently on the (rate cut)...," said Franklin Bissett Core Plus Bond Fund portfolio manager Darcy Briggs. "The FX market tends to react with a lot of volatility, and tends to overshoot in both directions." While there could be some near-term pullback, a number of currency strategists see the loonie breaking through the C$1.30 barrier over the medium to longer term, particularly with the expected Fed hike still looming. But how much further the Canadian dollar will retreat and how long it can sustain those levels will depend in large part on how much of the Fed's intentions are priced into the market. At 9:06 a.m. EDT (1306 GMT), the Canadian dollar was trading at C$1.2929 to the greenback, or 77.35 U.S. cents, slightly weaker than the Bank of Canada's official Wednesday finish at C$1.2920, or 77.40 U.S. cents. The currency traded relatively narrowly on Thursday, between $1.2911 and C$1.2950, but was still holding at more than six-year lows. There was little domestic data on Thursday to budge the currency. However, Canadian and U.S. inflation data for June are due on Friday at 8:30 a.m. EDT. Canadian government bonds were mixed across the maturity curve, with the longer-term prices falling. The two-year price was off 2 Canadian cents to yield 0.409 percent, and the benchmark 10-year slid 10 Canadian cents to yield 1.606 percent. The Canada-U.S. two-year bond spread was -26.4 basis points, while the 10-year spread was -77.9 basis points. (Reporting by Solarina Ho; Editing by Lisa Von Ahn)
© Thomson Reuters 2017 All rights reserved.