CANADA FX DEBT-C$ steadies after hitting 1-month high

Thu Dec 6, 2012 8:26am EST

* C$ at C$0.9915 vs US$, or $1.0086 U.S. cents
    * Bond prices edge higher across the curve

    By Claire Sibonney
    TORONTO, Dec 6 (Reuters) - The Canadian dollar eased from a
one-month high against the greenback on Thursday to trade little
changed, tracking U.S. equity futures as the progress of fiscal
negotiations in Washington continues to drive direction.
    Earlier in the session, the currency rallied to its
strongest level since early November, extending gains made over
the last two days after the Bank of Canada kept its bias towards
future rate hikes at a policy meeting on Tuesday. 
    Canada's central bank was unwavering in its view that it may
need to raise interest rates, not cut them, even as the
country's economy shows signs of slowing. 
    "The Canadian dollar has generally had a strong tone this
week. The fact that the Bank of Canada maintains a very loose
long-term tightening bias is providing some support to the
currency, a contrast with the complete opposite from the Federal
Reserve," said Sal Guatieri, senior economist at BMO Capital
Markets.
    U.S. stock index futures were little changed in what could
be another choppy session. 
    U.S. President Barack Obama said there could be a quick deal
to avert the "fiscal cliff" - tax hikes and spending cuts set to
begin next year, possibly driving the U.S. economy back into
recession - if Republican leaders agree to raise tax rates for
those making more than $250,000 a year. 
    Meanwhile, the European Central Bank held its main interest
rate at a record low of 0.75 percent as expected, leaving
investors to shift their attention to new economic forecasts for
clues about possible cuts next year. 
    At 8:15 a.m. (1315 GMT), the Canadian dollar stood
at C$0.9915 versus its U.S. counterpart, or $1.0086 U.S. cents,
compared with Wednesday's North American finish at C$0.9917, or
$1.0084. Earlier, the currency touched C$0.9905, or $1.0096, its
strongest level since Nov. 7.
    Looking ahead, markets are also focusing on Friday's
November employment reports from both Canada and the United
States. Economists expect the United States to have added 93,000
jobs and Canada to have added 10,000 jobs. 
 
    Guatieri said investors will likely be paying more attention
to the Canadian figures on Friday, as the U.S. data is expected
to be impacted by Superstorm Sandy that hit in late October.
   "The market anticipates payrolls getting slashed by the
storm," he said. "The Canadian number will be a more believable
estimate of the underlying trend in labor markets than the U.S.
figure."
    Canadian bond prices edged higher across the curve. The
two-year bond was up 1 Canadian cent to yield 1.038
percent, and the benchmark 10-year bond gained 4
Canadian cents to yield 1.680 percent.
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