September 24, 2008 / 8:43 PM / 12 years ago

Canadian dollar flat as market takes a breather

* Canadian dollar dips 0.04 percent vs greenback

* Bond prices track larger U.S. market higher

* Speech by Bank of Canada governor focus for Thursday

By John McCrank

TORONTO, Sept 24 (Reuters) - The Canadian dollar was little changed against the U.S. dollar in quiet trading on Wednesday, while bond prices tracked the larger U.S. market higher ahead of Thursday’s speech by the governor of the Bank of Canada.

The Canadian unit ended the North American session at C$1.0367, or 96.46 U.S. cents, from C$1.0363, or 96.50 U.S. cents, at Tuesday’s close.

The currency spent the day in a relatively tight range of C$1.0313 to C$1.0375, after intraday moves of well over 1 percent most days in the past couple weeks.

“If anything, the market needs a breather and, today, with the lack of catalysts, would seem a reasonable day to take one,” said Shane Enright, currency strategist at CIBC World Markets.

The U.S. government’s proposed $700 billion plan to rescue the country’s battered financial sector was still in focus throughout the day, but the effects it might have on the U.S. dollar were largely priced in already, said Enright.

Berkshire Hathaway Inc’s (BRKa.N) (BRKb.N) planned $5 billion in Goldman Sachs Group Inc GS.N. See [ID:nNHKG43245] helped stabilize the market, but failed to spark a rally.

Nor did the U.S. Federal Reserve’s move of setting up currency swap lines with more central banks in an attempt to boost short term U.S. dollar liquidity and drive down interbank lending rates. See [ID:nLO656400]


Canadian bond prices rose slightly, mostly tracking the bigger moves on the U.S debt market, as investors sought low-risk assets amid the financial turmoil.

“The (Canadian) market is really on the sidelines until tomorrow’s Bank of Canada speech by Governor Mark Carney,” said Charmaine Buskas, senior economics strategist at TD Securities.

“The topic of his speech is reflections on economic developments, so, it’s a very timely speech, and the Canadian market will be looking for ... (the bank) to have a plan in hand should the U.S. spillover gather some traction,” she said.

The Bank of Canada tiptoed back into the market on Wednesday, with an 84-day C$2 billion purchase and resale agreement aimed keeping the conditions liquid. See [ID:nTOR003470]

The two-year bond rose 7 Canadian cents to C$99.84 to yield 2.826 percent, while the 10-year bond added 13 Canadian cents to C$104.95 to yield 3.637 percent.

The yield spread between the two- and 10-year bond was 84.1 basis points, up from 78.8 basis points at the previous close.

The 30-year bond gained 10 Canadian cents to C$114.20 for a yield of 4.094 percent. In the United States, the 30-year treasury yielded 4.380 percent.

The three-month when-issued T-bill yielded 2.02 percent, down from 2.20 percent at the previous close. (Reporting by John McCrank; editing by Rob Wilson)

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