June 4, 2009 / 12:17 PM / 9 years ago

CANADA FX DEBT-C$ edges lower ahead of BoC rate announcement

 By Jennifer Kwan
 TORONTO, June 4 (Reuters) - The Canadian dollar was lower
against the greenback on Thursday morning, ahead of the Bank of
Canada rate announcement as investors awaited any statements
about the currency's recent rally.
 The rate decision itself is seen as a "non-event" since the
central bank has said it plans to leave interest rates low,
currently at 0.25 percent, until next year, said George Davis,
chief technical strategist RBC Capital Markets.
 But market watchers are anticipating the bank will address
the currency's surge -- in May alone it rose a massive 9.3
percent -- as well as offer further guidance on its framework
for unconventional policy. [ID:nN02506478]
 "I think the concern the Bank of Canada might have is an
excessively strong currency may serve as a headwind in terms of
any pending economic recovery," said Davis.
 "If the Bank of Canada does hint that the currency is
serving as a bit of a hindrance to a recovery scenario then
we're likely to see some position squaring, people getting out
of their long Canadian dollar positions."
 If they don't say anything, Davis said he would expect the
currency to rally further, especially given that equity markets
largely stabilized overnight and commodity markets are higher.
 The price of oil CLc1 staged a comeback above $67 a
barrel after a sharp drop in the previous session, boosted by
increased oil price forecasts from U.S. investment bank Goldman
Sachs GS.N.
 At 8:00 a.m. (1200 GMT), the Canadian currency was at
C$1.1151 to the U.S. dollar, or 89.68 U.S. cents, down from
Wednesday's session close at C$1.1084 to the U.S. dollar, or
90.22 U.S. cents.
 Overnight, the unit gained as much as C$1.1020 to the U.S.
dollar, or 90.74 U.S. cents.
 Canadian bond prices were mostly lower across the curve, as
Toronto followed U.S. Treasuries lower on lingering concerns
about a spike in government debt issuance. [ID:nL4611253]
 The benchmark two-year government bond was unchanged at
C$100.18 to yield 1.158 percent, while the 10-year bond fell 20
Canadian cents to C$103.30 to yield 3.358 percent.
 The 30-year bond dropped 40 Canadian cents to C$117.10 to
yield 3.981 percent. The comparable U.S. Treasury issue yielded
4.4903 percent.
 (Reporting by Jennifer Kwan; Editing by Theodore d'Afflisio)

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