December 9, 2013 / 3:03 PM / 7 years ago

CANADA FX DEBT-C$ remains under pressure on Fed tapering, dovish BoC

By Solarina Ho
    TORONTO, Dec 9 (Reuters) - The Canadian dollar softened
marginally against its U.S. counterpart on Monday as a dearth of
data kept trading subdued and markets continued to anticipate
the U.S. Federal Reserve will eventually scale back its massive
bond purchases.
    The currency extended Friday's losses following
better-than-expected employment data in the United States, which
supported expectations the Fed could taper sooner rather than
    "Everyone still considers it to be an uptrend, the dollar
versus Canada - as in the Canadian dollar weakening," said Darcy
Browne, managing director of Capital Markets Trading at CIBC.
    "The majority of that is on the basis of potential tapering,
a stronger U.S dollar in general as well as a more dovish Bank
of Canada ... having said that, we haven't really done very much
over the last two, three days," he added.
    The Bank of Canada - concerned about the amount of slack in
the economy - kept its overnight interest rate at a near record
low last week and economists in a Reuters poll expect no change
until the second quarter of 2015. 
    The Canadian dollar was trading at C$1.0667 to the
greenback, or 93.75 U.S. cents at 9:42 a.m. (1442 GMT), weaker
than Friday's North American finish at C$1.0656, or 93.84 U.S.
    The loonie, which was underperforming most major currency
counterparts on Monday, was expected hold near current trading
ranges and capped around C$1.0670 as the market awaited fresh
news, said Browne.
    A faster timeline for the Fed reducing its $85 billion a
month in bond purchases is seen as bearish for the Canadian
dollar as the move is expected to reduce risk appetite and
benefit the U.S. currency.
    Canadian government bond prices rose across the maturity
curve, with the two-year up 3.2 Canadian cents to
yield 1.078 percent and the benchmark 10-year rose
14 Canadian cents to yield 2.672 percent.
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