CANADA FX DEBT-C$ firms vs US$ as G7 comments fuel currency debate

Tue Feb 12, 2013 1:07pm EST

* C$ at C$1.0032 vs US$, or 99.68 U.S. cents
    * BoC's Carney testifies in parliament; stays the course
    * Foreign currencies volatile following G7 comments

    By Solarina Ho
    TORONTO, Feb 12 (Reuters) - The Canadian dollar erased early
losses to trade stronger against its U.S. counterpart on
Tuesday, caught up in volatile moves in global currency markets
following comments by the Group of Seven wealthy nations.
    The G7 comments overshadowed the impact of testimony by Bank
of Canada Governor Mark Carney to a Canadian parliamentary
committee in which he reiterated the central bank's view that an
interest rate increase is less imminent. 
    The Japanese yen rallied against the dollar and euro,
rebounding from recent multi-year lows, after a G7 official said
a statement by the group was meant to express concern about
excessive movements in the Japanese yen.  
    "We've seen a great deal of volatility in FX just given all
of these contradictory, confusing messages coming out of the
G7/G8/G20 ... contrary to their attempt to try and reduce
volatility and provide more clarity in FX markets. They've
managed to just complicate everything," said David Tulk, chief
Canada macro strategist at TD Securities in Toronto.
    "The Canadian dollar is appreciating on the back of that ...
on the back of the U.S. dollar weakening," he said.
    The currency erased early losses and was trading at
C$1.0032 versus the U.S. dollar, or 99.68 U.S. cents midway
through Tuesday's North American session, firmer than Monday's
close at C$1.0043, or 99.57 U.S. cents.
    Carney, who is the incoming Bank of England governor, did
say the Group of Seven wealthy nations must go into this
weekend's G20 meetings forcefully pressing major emerging
economies to adopt flexible foreign exchange rates.
    He also said it was critical that no G7 members use monetary
policy to target exchange rates. 
    On the domestic front, he said a weak jobs market is a
factor behind Canada's decision to keep interest rates low,
describing the country's 7 percent jobless rate as undesirably
high. 
    "They pretty much rehashed the MPR (Monetary Policy Report)
line for line and did very little to ... illuminate anything too
interesting as to the outlook for monetary policy in Canada,"
said Tulk.
    With the exception of sterling and the U.S.
dollar, Canada was mostly weaker against other major currencies.
    The Canadian dollar, which has struggled in the wake of last
Friday's reports that showed surprise job losses in January and
lower-than-expected housing starts, was not far off two-week
lows against the greenback. 
    Canadian government bond prices were mixed, with the price
of a two-year bond up less than half a Canadian cent
to yield 1.115 percent and the benchmark 10-year bond
 down 9 Canadian cents, yielding 1.985 percent.
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