July 22, 2010 / 12:28 PM / 10 years ago

CANADA FX DEBT-C$ climbs as greenback reels from Bernake remarks

 * C$ rises to 96.02 U.S. cents
 * Bonds lower across the curve
 By Claire Sibonney
 TORONTO, July 22 (Reuters) -The Canadian dollar edged
higher versus its U.S. counterpart on Thursday as the greenback
plunged after Federal Reserve chairman Ben Bernanke painted a
gloomy outlook for the U.S. economy, while better-than-forecast
euro zone data buoyed riskier currencies.
 On Wednesday, Bernanke rekindled unease in his testimony to
lawmakers by describing the prospects for the U.S. economy as
"unusually uncertain", sending the U.S. dollar to a seven-month
low. [FRX/]
 "Essentially what he's telling us is that rates are on hold
for a very, very long time," said Camilla Sutton, senior
currency strategist at Scotia Capital.
 "There's moderate growth, a gradual decline in unemployment
and subdued inflation for many years to come and that implies
rates are on hold for a long time, which is a U.S. dollar
 But a jump in new manufacturing orders and services
activity in Germany gave investors some reassurance.
 Sutton added that market speculation on China's new foreign
exchange policy is also driving the greenback lower.
 China on Thursday sent its clearest signal yet that it is
determined to steer the value of the yuan in relation to a
basket of currencies, not the U.S. dollar. [ID:nTOE66L07K]
 At 8:03 a.m. (1203 GMT), the Canadian currency CAD=D4 was
at C$1.0414 to the U.S. dollar, or 96.02 U.S. cents, up from
Wednesday's finish at C$1.0477 to the U.S. dollar, or 95.45
U.S. cents.
 Sutton expected the day's range for the Canadian dollar to
be fairly wide at C$1.0333 to C$1.0486.
 World stocks and commodities also reversed earlier losses
and U.S. and Canadian equity futures pointed to a stronger
start. [MKTS/GLOB]
 Later in the morning, markets will be looking at Canadian
retail sales data for May, as well as several reports on U.S.
housing. ECONCA
 As well, the Bank of Canada should provide more details on
its view of the economy in its Monetary Policy Report, followed
by a press conference by Governor Mark Carney. And Bernanke
will speak to Congress again for the second day of his
semiannual testimony.
 "Risks are high today in a sense that we know that CAD is
well correlated with interest rates right now and we have both
the MPR and further commentary from Bernanke," said Sutton.
 The publication of European bank stress tests, due on
Friday, also kept investors cautious.
 With some risk appetite seeping back into the market,
Canadian bond prices were lower across the curve, tracking U.S.
Treasuries down. [US/]
 The two-year bond CA2YT=RR lost 4 Canadian cents to yield
1.540 percent, while the 10-year bond CA10YT=RR shed 27
Canadian cents to yield 3.192 percent.
 (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)

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