June 8, 2011 / 1:40 PM / 9 years ago

CANADA FX DEBT-C$ weakens after dovish Bernanke comments

 * C$ at C$0.9808 to the U.S. dollar, or $1.0196
 * Bonds firmer across curve, tracking U.S. Treasuries
 By Solarina Ho
 TORONTO, June 8 (Reuters) - Canada's dollar weakened
against its U.S. counterpart on Wednesday, pressured by the
Federal Reserve's downbeat comments on Tuesday about the U.S.
economy, the destination for most Canadian exports.
 Fed Chairman Ben Bernanke acknowledged the U.S. economy has
slowed, but did not offer hints that the Fed may come to the
economy's rescue once again. [ID:nN07142566]
 "The thing that I'm taking out of it is he's saying
inflation is going to be temporary," said John Curran, senior
vice president at CanadianForex, a commercial foreign exchange
dealing firm.
 "If they're not going to raise interest rates, neither is
Canada because we can't get too far ahead the States."
 Higher interest rates tend to support currencies by
attracting international capital flows. A recent poll had
showed Canada's central bank was expected by many to resume its
rate hike campaign in September. <CA/POLL>
 At 9:10 a.m. (1310 GMT), the currency CAD=D4 stood at
C$0.9808 to the U.S. dollar, or $1.0196, down from Tuesday's
North American finish of C$0.9755 to the U.S. dollar, or
 A report on Wednesday showed Canadian housing starts rose
in May to a slightly higher-than-expected seasonally adjusted
annual rate of 183,600 units, boosted by a pickup in multi-unit
buildings like condominiums. [CAHSTA=ECI]
 But Curran noted that much of Canada's own economic data
has been "mediocre at best" and investors were now focused on
employment numbers out on Friday. ECONCA
 "People are keeping their powder dry for Friday's (job)
number... You see a lousy number on Friday, we'll be trading on
a C$0.9900 handle for sure," he said.
 Curran expects the Canadian dollar to trade between the
C$0.9850 and C$0.9760/65 range on Wednesday.
 A dip in U.S. crude prices also did not help the
commodity-linked currency. Oil and gas is a key Canadian
export, and the currency can be sensitive to movements in crude
prices. [O/R]
 Canadian bond prices were firmer across the curve, tracking
movements in U.S. treasuries after Bernanke's comments. [US/]
 The two-year bond CA2YT=RR was up 3 Canadian cents to
yield 1.429 percent, while the 10-year bond CA10YT=RR added 8
Canadian cents to yield 3.022 percent.
 (Editing by Jeffrey Hodgson)

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