June 7, 2012 / 9:10 PM / in 5 years

Canadian dollar ends flat; China easing offset by Fed comments

TORONTO (Reuters) - The Canadian dollar closed flat against its U.S. counterpart on Thursday, as a boost from China’s surprise interest rate cut was offset by comments from U.S. Federal Reserve Chairman Ben Bernanke that suggested more monetary stimulus is not imminent.

Bernanke, testifying before Congress, said the Fed was ready to shield the U.S. economy if financial problems mounted, but disappointed investors hungry for signals that the U.S. central bank would conduct a third round of bond buying. <MKTS/GLOB>

The comments came one day after the European Central Bank put the onus on euro zone governments to solve the bloc’s debt crisis.

“The markets were looking for a little more out of the ECB and out of Bernanke as well, so there’s a little bit of disappointment,” said David Bradley, a director of foreign exchange trading at Scotiabank.

The Canadian dollar closed at C$1.0279 against the U.S. currency, or 97.29 U.S. cents, the same as Wednesday’s close.

Early on Thursday, China’s rate cut to shore up its flagging economy boosted global stocks and lifted growth-linked currencies in Canada, New Zealand and Australia. The Australian dollar hit a three-week high, while the Canadian dollar climbed as high as to C$1.0210 against the greenback.

Hopes of more U.S. monetary stimulus were further dashed by positive U.S. data on Thursday that showed the number of Americans lining up for new jobless benefits fell last week for the first time since April.

There was some upbeat news out of Europe, as Spain soothed fears that it is being cut off from financial markets by raising more than 2 billion euros ($2.5 billion) at a bond auction, although it had to pay dearly.

Speculation that Spain could become the fourth euro zone country to need an international bailout prompted investors to sell the euro heavily last week, although European sources have said Germany and European Union officials are urgently exploring ways to support Spain’s stricken banks.

“Every central bank in the world is acknowledging the fact that their policy is currently being dictated by what’s going on in Europe,” said Chris Applin, senior dealer at Canadian Forex in London.

Since data last week showed weak U.S. job creation in May, there has been rising speculation of more stimulus measures from global central banks.

The Bank of Canada joined the ECB in holding rates on Tuesday, but the tone of its statement signaled that its next move would be a rate hike.

The market expects that the Canadian May employment figures due out on Friday will not match the outsized job gains in the previous two months, which averaged almost 72,000 a month. The median forecast in a Reuters survey of economists is for a gain of 10,000.

Canadian bond prices were mostly lower. The two-year bond fell 2 Canadian cents to yield 1.061 percent, while the benchmark 10-year bond fell 27 Canadian cents to yield 1.837 percent.

With additional reporting by Jon Cook; Editing by Jeffrey Hodgson

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