September 22, 2010 / 12:20 PM / 10 years ago

CANADA FX DEBT-C$ hits 6-wk high after Fed statement

 * C$ touches high of 98.13 U.S. cents
 * Bonds follow U.S. Treasuries higher
 By Jennifer Kwan
 TORONTO, Sept 22 (Reuters) - Canada's dollar touched its
highest level in just over six weeks against the U.S. currency
on Wednesday as the greenback slid after the Federal Reserve
raised expectations of more monetary easing.
 The Fed expressed greater concern on Tuesday about sluggish
U.S. growth and low levels of inflation in a statement that
many took as opening the door wider to pumping more dollars
into the economy. [ID:nTRU002490] [ID:nN20109053]
 "I think they've (Fed) made it clear to the street they
have complete vigilance for deflation as opposed to inflation,"
said Firas Askari, head of foreign exchange trading at BMO
Capital Markets.
 In reaction, Askari said "you saw every currency in the
world rising against the U.S. dollar" as quantitative easing
essentially involves buying U.S. Treasuries or bonds and
flooding the market with greenbacks.
 "The other simple way of looking at it is yields will go
down and people don't want to hold U.S. dollars that are a
lower-yielding product than other currencies out there," said
 The Canadian currency  CAD=D3 strengthened to C$1.0191 to
the U.S. dollar, or 98.13 U.S. cents, its strongest level since
Aug. 6. But by 8:00 a.m. (1200 GMT), it retreated to C$1.0225
to the U.S. dollar, or 97.80 U.S. cents.
 Askari said the market will be looking for support and
resistance at C$1.0185 to the U.S. dollar and C$1.0270.
 The Canadian currency ended Tuesday's session at C$1.0268
to the U.S. dollar, or 97.39 U.S. cents.
 The Fed move followed data that showed Canada's annual
inflation rate slowed in August, suggesting the Bank of Canada
may suspend its rate-hiking campaign. [ID:nN21500487]
 Government bonds followed U.S. Treasuries, which rose after
the Fed statement was seen as signaling the U.S. central bank
was open to pumping more money into the economy. [US/]
 The two-year bond was up 8 Canadian cents to yield 1.418
percent, while the 10-year bond gained 46 Canadian cents to
yield 2.844 percent.
 (Reporting by Jennifer Kwan; Editing by Chizu Nomiyama)

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