January 24, 2011 / 10:04 PM / 10 years ago

CANADA FX DEBT-C$ firms slightly, looks to Tuesday CPI data

   * C$ firmer at C$0.9946, or $1.0054
 * Higher stocks support, but falling oil price weighs
 * Rising gas prices expected to boost Canadian CPI
 By Solarina Ho
 TORONTO, Jan 24 (Reuters) - The Canadian dollar finished
marginally stronger against the greenback on Monday, as a lack
of drivers kept trading light ahead of a slew of key economic
news later this week.
 Traders are looking ahead to the release of Canadian
consumer price index (CPI) data at 7 a.m. (1200 GMT) on
Tuesday, which is expected to show the annual inflation rate
climbed to 2.5 percent in December, while price increases
excluding food and energy costs were more subdued.
 The report could offer hints on whether the Bank of Canada,
mandated to keep inflation at the midpoint of a 1 to 3 percent
range, is likely to push back or bring forward rate hikes.
 "I'm not sure that even if you do get an outsized move one
way or the other on the CPI that it should have much in the way
of lasting effects," said Mark Chandler, the head of Canadian
fixed income and currency strategy at RBC Capital Markets.
 "The Bank of Canada already let their intentions be known
last week they're not in any rush one way or another."
 Last week, the central bank signaled that sluggish growth
and a strong domestic currency could keep interest rates on
hold for longer than markets had anticipated. [ID:nN18290983]
 Investors were also cautious before the U.S. Federal
Reserve's first monetary policy meeting of the year on Tuesday
and Wednesday.
 "Canada seems to be more sensitive to the U.S. numbers than
even some of the Canadian data that we've had, so I think that
the idea of Canada being highly leveraged to the U.S. recovery
story still holds true," said TD Securities chief currency
strategist Shaun Osborne.
 "Better U.S. numbers tend to mean the Canadian dollar does
a little better."
 The currency CAD=D4 closed at C$0.9946 to the U.S.
dollar, or $1.0054 on Monday, firming from Friday's North
American finish of C$0.9954, or $1.0046.
 "In terms of USD/CAD -- not much movement at all really.
Today Canada is kind of middling overall," said Osborne.
 A firmer equities market provided some positive support for
the commodities-sensitive currency. But gains were tempered
somewhat on oil, a major Canadian export, as U.S. prices
slipped for the fifth straight day due to high inventories.
 Osborne expects the Canadian dollar to trade between the
C$0.9900 and parity range in the near-term.
 Canadian bond prices nudged higher. The two-year bond
CA2YT=RR was up 1.3 Canadian cents to yield 1.725 percent,
while the 10-year bond CA10YT=RR rose 10 Canadian cents to
yield 3.314 percent.
 (Editing by Jeffrey Hodgson)

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