February 18, 2011 / 1:15 PM / in 9 years

CANADA FX DEBT-C$ inches up, bonds rise, after Canada CPI

 * C$ heads higher to $1.0169
 * Bonds edge up across the curve
 * Annual inflation rate 2.3 pct vs 2.4 pct in December
 * Bank of Canada under no pressure to raise rates in March
 By Ka Yan Ng
 TORONTO, Feb 18 (Reuters) - The Canadian dollar steadied
against the U.S. dollar after a brief spike higher on Friday
morning on data that showed Canada's annual inflation rate
 Short-term government bonds prices ticked higher after the
data suggested that the Bank of Canada was under no immediate
pressure to hike interest rates sooner than expected.
 Canada's annual inflation rate slipped to 2.3 percent in
January from 2.4 percent in December as energy price increases
eased, Statistics Canada said. For details, see [ID:nSCLIDE79I]
 The year-on-year core rate, which is closely watched by the
Bank of Canada, slipped to 1.4 percent from 1.5 percent in
 The currency had firmed after the figures to as high as to
C$0.9825 to the U.S. dollar, or $1.0178 -- not far off the
near-three year high hit on Thursday -- from about C$0.9842 to
the U.S. dollar, or $1.0161, just ahead of the data
 But it quickly pared gains and by 7:45 a.m. (1245 GMT),   
the Canadian dollar CAD=D4 was at C$0.9834 to the U.S.
dollar, or $1.0169, up from Thursday's North American session
close of C$0.9849 to the U.S. dollar, or $1.0153.
 "Given that it was within spitting distance of consensus, I
don't think there's too much here to drive the market one way
or the other," said David Tulk, chief Canada macro strategist
at TD Securities.
 "We could see central bank expectations for hikes maybe
pushed back just a little bit, maybe a tiny bit of a bid in the
two-year (government of Canada bond) but we've noticed that the
market has been reluctant to rally on softer data so any move
will be fairly minor."
 Friday's figures do little to challenge market expectations
that the central bank, which targets 2 percent inflation, will
hold rates steady until at least May.
 Overnight index swaps, which trade based on expectations
for the key central bank rate, showed investors see a 99.59
percent probability rates will stay on hold March 1, little
changed from before the data. BOCWATCH
 Canadian bond prices were higher across the curve, with the
interest-rate sensitive two-year Canadian government bond
CA2YT=RR up 5 Canadian cents to yield 1.883 percent, while
the 10-year bond CA10YT=RR advanced 13 Canadian cents to
yield 3.468 percent.
 With no other data due on Friday, the market's focus now
turns to the Group of 20 financial leaders meeting in Paris,
where the world's major economies were split over how to
measure imbalances in the global economy in a bid to avert
future financial crises. For details, see [ID:nLDE71D100]
  (Reporting by Ka Yan Ng, Editing by Chizu Nomiyama)

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