March 28, 2011 / 1:42 PM / 9 years ago

CANADA FX DEBT-C$ firms after BoC comments, bond prices fall

 * C$ firms to C$0.9775 to the U.S. dollar, or $1.0230
 * Bond prices weaker across the curve
 By Solarina Ho
 TORONTO, March 28 (Reuters) - The Canadian dollar was
stronger against its U.S. counterpart on Monday after comments
over the weekend by the Bank of Canada underpinned expectations
of a rate rise, even as oil prices retreated.
 Canada's top central banker, Mark Carney, said soaring
commodity prices, which have been a boon for Canada, could last
for decades and warned emerging market peers that it would be a
mistake to delay raising interest rates for too long.
 "If you were listening to Carney, he was talking over the
weekend about inflationary pressures and that the Canadian
dollar strength is not the main issue for them," said John
Curran, senior vice president at CanadianForex.
 "If anything, that will help the Canadian dollar with
people thinking there could be a rate hike in the near
 The most recent Reuters poll shows that most of Canada's
primary securities dealers are forecasting the next interest
rate hike to be on either the bank's May 31 or July 19
announcements, while the market pricing reflects an October
bet. [ID:nN18126761] [CA/POLL]
 At 8:51 a.m. (1351 GMT), the currency CAD=D4 stood at
C$0.9775 to the U.S. dollar, or $1.0230, up from Friday's North
American finish of C$0.9817, or $1.0186.
 The currency, which is often bolstered by higher oil
prices, firmed despite weaker crude costs. Crude prices fell
after Libyan rebels regained control of key oil towns and
weekend unrest in the region was limited. [O/R]
 "It's pretty lackluster to begin the week here," said
Curran, adding that he expects the market to be looking to U.S.
Federal Reserve speakers "for general market consensus since
Plosser's comments on Friday."
 Charles Plosser, president of the Philadelphia Federal
Reserve, said on Friday that the U.S. central bank would have
to raise rates and shrink its balance sheet "in the
not-too-distant future" in order to avoid damaging the economy
through inflation. The hawkish comments buoyed the U.S. dollar
and pressured the Canadian currency on Friday. [ID:nDZE7DA02M]
 "The Canadian dollar is not going to be a focus for many
people at this point in time. Political risks are out there,
but they're being way overplayed," said Curran.
 The minority Canadian government fell on Friday, forcing an
election in May, but market reaction was relatively muted.
 With few drivers motivating the currency, the Canadian
dollar was expected to be range-bound, trading between C$0.9750
and C$0.9850, until it finds something to provide momentum for
the next move.
 The monthly Canadian gross domestic product data is
expected on Thursday, and the U.S. non-farm payrolls will be
released on Friday, both of which will help investors gauge the
economic recovery in North America.
 Canadian bond prices were weaker across the curve,
mirroring U.S. Treasuries, which widened earlier losses
following U.S. data that showed a rise in personal income,
spending and prices. [US/]
 The two-year bond CA2YT=RR was down 10 Canadian cents to
yield 1.792 percent, while the 10-year bond CA10YT=RR shed 53
Canadian cents to yield 3.313 percent.
 (Editing by Leslie Adler)

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