CANADA FX DEBT-C$ softens; hits multi-year high versus Aussie

Fri Jul 12, 2013 10:34am EDT

* C$ at C$1.0400 vs the US$, or 96.15 U.S. cents
    * CAD hits strongest level against the AUD in nearly 3 years
    * Bank of Canada expected to maintain hawkish bias next week
    * Bond prices mostly higher

    By Solarina Ho
    TORONTO, July 12 (Reuters) - The Canadian dollar softened on
Friday against its U.S. counterpart but was still on track to
post a near 2 percent gain for the week, and the Canadian dollar
hit its strongest against the Australian dollar in nearly three
years.
    The Canadian dollar had surged earlier in the week against
the greenback after traders scaled back expectations that the
Federal Reserve will taper its monteary stiumulus soon.
    The U.S. dollar on Wednesday and Thursday reeled since Fed
chief Ben Bernanke cast doubts on Wednesday over when the
central bank will start slowing its asset purchase program.
    Meanwhile on Friday, the Australian dollar collapsed on
expectations of a lower growth rate out of China and rising
fears that the Reserve Bank of Australia will cut rates.
    Camilla Sutton, chief currency strategist at Scotiabank said
the Canadian dollar has been left out of the overnight moves, as
investors shift focus to the Bank of Canada meeting next week.
    "The expectation is the Bank of Canada will maintain its
slight hawkish bias," said Sutton, who expects the currency to
trade between C$1.0326 and C$1.0410 on Friday.
    A Reuters poll of economists released on Wednesday showed
the Bank of Canada is expected to keep its bias toward
tightening on July 17, but slow growth and low inflation mean
that an actual rate hike will not happen until the fourth
quarter of 2014. 
    The spread between Canadian oil exports and imports have
also narrowed dramatically as well, Sutton said, which is also a
positive for the Canadian dollar.
    At 10:09 a.m. (1409 GMT), the Canadian dollar was
trading at C$1.0400 versus the greenback, or 96.15 U.S. cents,
weaker than the Bank of Canada's posted closing rate on Thursday
at C$1.0385, or 96.29 U.S. cents.
    Prices for Canadian government debt were mostly higher
across the maturity curve, with the two-year bond 
rising 1.3 Canadian cents to yield 1.126 percent. The benchmark
10-year bond climbed 25 Canadian cents, yielding
2.415 percent.
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