CANADA FX DEBT-C$ gains fade vs yen, little changed vs USD

Fri Mar 18, 2011 5:24pm EDT

 * Bank of Canada says took part in yen intervention
 * C$ jumps vs yen after BoC intervention but then fades
 * C$ rises to $1.0141
 * Bonds flat, weigh Libya against rising stocks
 * Canada annual inflation rate eases in February
 (Adds details)
 By Ka Yan Ng
 TORONTO, March 18 (Reuters) - The Canadian dollar CAD=D4
finished little changed against the greenback on Friday, and
the early gains it made against the yen on G7 central bank
intervention faded a bit as the session wore on.
 The currency took tame domestic inflation data in stride,
and attracted only muted attention for most of the day. Traders
were focused instead on the move by Group of Seven central
banks, including the Bank of Canada, to sell the yen, which had
risen to record highs against some currencies due to anxiety
over the crisis in quake-ravaged Japan. JPY= [ID:nLDE72H19Z]
 The Bank of Canada's participation will be reflected in the
country's foreign reserves report in early April, a central
bank spokesman said. [ID:nN18210972]
 The Canadian dollar had weakened against the yen, with one
Canadian dollar buying as little as 78.03 yen on Thursday, a
level not seen since April 2009.
 It jumped as high as 83.34 yen immediately after the Bank
of Canada confirmed it was intervening, but by session's end,
had eased to around 81.85 yen. CADJPY=
 "Canada has been lackluster today all day in a really tight
range," said Firas Askari, head of foreign exchange trading at
BMO Capital Markets. "Canada/yen has come off just because
dollar/yen has come off."
 The U.S. dollar made sharp gains after the G7 action but
later fell back. [FRX/]
 Analysts said it was not important how much the G7 central
banks may have spent but the show of unity was the point. TD
Securities noted that Canada's yen reserves are relatively
small, $252 million as of March 3, and that any movement in the
yen versus the Canadian unit is more likely to be dictated by
U.S. Federal Reserve action than by that of the Canadian
central bank.
 "The holdings of reserves that the (Bank of Canada) has of
Japanese yen are fairly small so I think this is to provide
moral support and to underpin the consensus across the G7 to
support Japan," said David Tulk, chief Canada macro strategist
at TD Securities.
 The Canadian currency had a lackluster session against the
U.S. currency, finishing at C$0.9861 to the U.S. dollar, or
$1.0141, little changed from Thursday's North American session
close at C$0.9863 to the U.S. dollar, or $1.0139.
 It finished a volatile week -- during which it fell more
than 2-1/2 cents to hit its weakest point since Feb. 11 -- down
1.5 percent.
 TAME INFLATION, BOC SEEN IN NO HURRY TO UP RATES
 Data on Friday showed Canada's annual inflation rate in
February cooled to 2.2 percent from 2.3 percent in January,
just below the consensus forecast of 2.3 percent, and the core
rate fell to its lowest level on record at 0.9 percent.
[ID:nSCLIEE7AG]
 The docile price environment suggested the Bank of Canada
can hold off on raising interest rates, and a Reuters poll
showed more primary dealers now say the first rate hike of 2011
will come in the second half of the year rather than the
first.
 Overnight index swaps, which trade based on expectations
for the key central bank rate, showed the market is more
bearish on rate rises than the primary dealers, implying the
year's first rate rise won't come until October. BOCWATCH
[ID:nN18126761]
 Government bonds were flat to mildly higher, outperforming
U.S. Treasuries, as a cease-fire declaration in Libya pared
safety bids as did rises on global stock markets.
 The two-year Canadian government bond CA2YT=RR was off 1
Canadian cent to yield 1.608 percent, while the 10-year bond
CA10YT=RR gained 12 Canadian cents to yield 3.173 percent.
 (Additional reporting by Claire Sibonney; Editing by Peter
Galloway)

















































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