CANADA FX DEBT-C$ retreats as Fed eyes timing for trimming stimulus

Fri Jun 28, 2013 4:56pm EDT

* C$ at C$1.0518 vs US$, or 95.08 U.S. cents
    * Investors buy US$ in end-of-month repositioning
    * Quiet week ahead until Friday due to holidays
    * Monday is Canada Day; Thursday is U.S. Independence Day
    * U.S. and Canada employment data due next Friday

    By Solarina Ho
    TORONTO, June 28 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday with the greenback
gaining as investors priced in the chance that the U.S. Federal
Reserve could begin to trim its stimulative asset purchase
program as early as September.
    In remarks of Friday, Fed Governor Jeremy Stein highlighted
the possibility that the central bank will need to consider
reducing its economic stimulus program as early September.
 
    The Canadian dollar briefly pared its losses early in the
session after domestic data showed the economy grew by 0.1
percent in April from March, the fourth consecutive
month-on-month gain. The modest increase matched analysts'
expectations. 
    The squaring of dealer positions at the end of the month and
the end of the second quarter likely also supported the U.S.
dollar.
    "GDP was a nonevent. The real event today was month-end
revaluations, which favored U.S. dollar buying," said John
Curran, senior vice president at CanadianForex.
    The Canadian dollar finished the last North
American trading session of June at C$1.0518 to the U.S. dollar,
or 95.08 U.S. cents, weaker than Thursday's close of C$1.0475,
or 95.47 U.S. cents. The currency lost 1.4 percent this month.
    The Canadian dollar, whose performance was mixed against
other major currencies, traded between C$1.0454 and C$1.0554
during the session, at one point weakening toward levels not
seen since October 2011.
    "We're seeing the U.S. yield curve and the U.S. 10-year
moving back up fairly steeply," said Jeremy Stretch, head of
foreign exchange strategy at CIBC World Markets in London.
    "It's providing a backstop for the U.S., where there might
be some cautious U.S. dollar buying into month-end as well. The
combination of those two factors is keeping the Canadian dollar
a little bit on the defensive."
    Next week is expected to be quiet until Friday, when Canada
and the United States report jobs data for June. Canadian
markets are closed on Monday for the Canada Day holiday and U.S.
markets are closed on Thursday for Independence Day.
    "Up until Friday, I would say that we would probably be very
similar to what we saw this week - get some consolidation in the
currency, which would alleviate some overbought conditions ...
and then Friday, strap yourself in," Curran said.
    The market will be keen to see whether last month's stellar
95,000 jobs created in Canada in May was an aberration.
Economists polled by Reuters are expecting a much more modest
2,500 new jobs in June. 
    Canadian government debt prices were mostly lower across the
maturity curve. The two-year bond was down half a
Canadian cent to yield 1.224 percent, while the benchmark
10-year bond fell 25 Canadian cents to yield 2.442
percent.
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