June 22, 2011 / 12:48 PM / 9 years ago

CANADA FX DEBT-C$ softens ahead of Fed statement

 * C$ at C$0.9733, or $1.0274
 * Bond prices firmer across curve as risk appetite wanes
 By Solarina Ho
 TORONTO, June 22 (Reuters) - The Canadian dollar was
slightly weaker against its U.S. counterpart on Wednesday,
mirroring a retreat in global equities and commodities as
markets positioned themselves ahead of the U.S. Federal Reserve
policy announcement.
 The market will be looking to the Fed for clues about its
handling of the faltering economic recovery. The central bank
is likely to acknowledge renewed weakness in the economy in a
post-meeting statement but may not take any action. For more
 "The market again is on hold, awaiting the Fed and (Fed
Chairman Ben) Bernanke. And even though it's more likely going
to be a non-event, it's seemingly another reason to not do a
whole lot of trading," said Darcy Browne, managing director of
capital markets trading at CIBC.
 "The volumes had been reduced because of the uncertainty.
People are waiting for more pieces of the puzzle to put
together before they apply the risk. Yesterday, we waited for
Greece ... and now we're waiting for the Fed. It's just this
waiting game."
 At 8:18 a.m. (1218 GMT), the currency CAD=D4 stood at
C$0.9733 to the U.S. dollar, or $1.0274, weaker than Tuesday's
North American finish at C$0.9724 or $1.0284.
 The markets rallied on Tuesday, optimistic about the
expected outcome of a confidence vote in Greece. The government
survived the vote to avoid a debt default which helped ease
concerns on the vulnerability of risky assets.
 "It's up and down with commodities, and equities, and risk
sentiment and to-ing and fro-ing, and we're right in the middle
of a range. There's no new fundamental news out of Canada to
push the currency one way or another," said Browne.
 With oil a key Canadian export, the commodity-linked
Canadian dollar often moves in tandem with crude prices. Oil
slipped as investors were cautious ahead of the Fed meeting and
on lingering anxiety over the state of the euro zone. [O/R]
 Browne expected the currency to trade between C$0.9700 and
C$0.9770 on Wednesday, and sees resistance around C$0.9650 in
the short term and headwinds past the C$0.9850-C$0.9900 level.
 The retreat was reflected in higher Canadian government
prices across the curve as investors edged back toward safety.
 The two-year bond CA2YT=RR rose 3 Canadian cents to yield
1.505 percent, while the 10-year bond CA10YT=RR climbed 15
Canadian cents to yield 2.963 percent.
 (Editing by James Dalgleish)

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