CANADA FX DEBT-C$ firms, eyes US$ parity ahead of Fed policy decision

Wed May 1, 2013 9:25am EDT

* C$ at C$1.0076 vs US$, or 99.25 U.S. cents,
    * Fed decision eyed; dovish tone expected
    * Bonds higher across the curve

    By Alastair Sharp
    TORONTO, May 1 (Reuters) - The Canadian dollar was pushing
towards equal value with its U.S. counterpart on Wednesday,
looking for its sixth straight day of gains, ahead of a U.S.
Federal Reserve policy decision which currency strategists
expect will show dovish tendencies.
    Positive domestic data has also helped the loonie, as
Canada's currency is colloquially known, and forced some
investors to cover their short positions. A short position is a
bet that an asset will drop in value.
    "We have a mixed bag of things, we have better fundamental
data, so retail sales and GDP helped," said Camilla Sutton,
chief currency strategist at Scotiabank. "We also have the
pushing out of expectations for a tapering of QE in the U.S, so
a broadly weaker U.S. dollar, that's helped."
    Retail sales data for February surprised market participants
last week, while stronger-than-expected gross domestic product
data for February released on Tuesday backed up the view of a
rebound.  
    At 9:05 a.m. (1305 GMT) the Canadian dollar was
trading at C$1.0076 to the greenback, or 99.25 U.S. cents, much
where it closed Tuesday's North American session.
    The currency has gained almost 2 percent in the last week.
    "We trade close to parity, and we really struggle to move
sustainably or substantially away from it," Scotiabank's Sutton
said. "For every positive factor there's an offsetting negative
factor."
    Prices for Canadian government debt were higher across the
curve, with the two-year bond up a third of a
Canadian cent to yield 0.921 percent and the benchmark 10-year
bond rising 14 Canadian cents to yield 1.684
percent.
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