CANADA FX DEBT-C$ flattens out ahead of key data, Fed

Mon Jan 28, 2013 4:32pm EST

* C$ ends flat at C$1.0065 versus US$, or 99.35 U.S. cents
    * Markets look ahead to U.S., Canada GDP and Fed meeting
    * Lost 1.5 pct last week after dovish Bank of Canada

    By Claire Sibonney
    TORONTO, Jan 28 (Reuters) - The Canadian dollar was
unchanged against its U.S. counterpart on Monday as investors
took a cautious stance ahead of key U.S. economic data and the
Federal Reserve's first policy meeting of the year later in the
week.
    Still, the currency recovered from a six-month low hit
earlier in the day, taking some direction from firmer commodity
prices after a gauge of planned U.S. business spending rose in
December, while rating agency Fitch scaled back the chance it
will strip the United States of its AAA status.
  
    "(The Canadian dollar) started out quite weak. All of the
commodity currencies were a bit under the gun ... but
realistically it was quite quiet trading and it wasn't really a
big driver ahead of Wednesday where we get a lot of news in
terms of GDP in the U.S. and the (Fed)," Mark Chandler, head of
fixed income and currency strategy at RBC Capital Markets, said.
    On Wednesday, investors will be paying close attention to
U.S. fourth quarter GDP figures and the Federal Open Market
Committee's policy announcement. Canada's November growth
numbers are due on Thursday.
    The Canadian dollar ended the North American
session at C$1.0065 to the greenback, or 99.35 U.S. cents, the
exact same level as Friday's close. It slipped 1.5 percent last
week.  
    Earlier in the day, the Canadian dollar had matched a
late-July low of C$1.01 versus the greenback, or 99.00 U.S.
cents, as the Bank of Canada's softer tone on interest rate
hikes last week continued to put pressure on the currency.
    The central bank said last week it would hold rates steady
for longer than it had previously expected, with tepid inflation
data later in the week backing up that stance.
    That pushed the Canadian currency to less than equal value
with the greenback for the first time in months.
    RBC on Friday pushed out its forecast for the next hike by
two quarters from the third quarter of 2013 to the first quarter
of next year, citing heightened worries over domestic capital
expenditures due to weak energy prices and the gap between
Canadian oil and global benchmarks.
    If the currency falls through the key C$1.01 level, it could
easily hit C$1.02 and potentially even reach C$1.03 in coming
weeks, said Greg Moore, foreign exchange strategist at TD
Securities. He saw decent Canadian-dollar resistance at
C$0.9970.
    Canadian bond prices retreated across the curve. The
two-year bond was off 3 Canadian cents to yield 1.155
percent, while the benchmark 10-year bond fell 17
Canadian cents to yield 1.967 percent.
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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