CANADA FX DEBT-C$ slips versus US$; hits multi-year high on Aussie

Fri Jul 12, 2013 5:07pm EDT

* C$ at C$1.0396 vs the US$, or 96.19 U.S. cents
    * CAD hits strongest level against 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
against the U.S. dollar on Friday, but it hit its strongest
level against the Australian dollar in nearly three years, and
it gained 1.7 percent on the greenback on the week.
    The Canadian dollar surged earlier this week against its
U.S. counterpart on dwindling market expectations that the U.S.
Federal Reserve would scale back its stimulus measures soon.
    The U.S. dollar on Wednesday and Thursday reeled after Fed
chief Ben Bernanke cast doubts on when the central bank will
start slowing its asset purchase program.
    "There's been a fair bit of volatility in the currency space
and as far as the Canadian dollar is concerned, some buying of
Canadian dollars on the back of the surprise guidance from Ben
Bernanke on Wednesday afternoon," said Jack Spitz, managing
director of foreign exchange at National Bank Financial.
     The Canadian dollar finished the North American
trading session at C$1.0396 versus the greenback, or 96.19 U.S.
cents, weaker than the Bank of Canada's posted closing rate on
Thursday of C$1.0385, or 96.29 U.S. cents.
    The Australian dollar slumped on expectations that China's
economic growth rate will fall, and rising fears that the
Reserve Bank of Australia will cut rates. Against the Canadian
dollar, it fell as low as 93.52 Canadian cents at one point, a
level not seen since Aug. 27, 2010.
    "As we head into the end of the week, we see some of those
long Canada positions being squared up ... to some degree that
squaring of positions is also ahead of the China data coming out
on Sunday night," Spitz added. 
     Heading into next week, market focus will turn squarely to
the Bank of Canada's next policy decision on July 17, the first
under the bank's new governor, Stephen Poloz.
    "The expectation is the Bank of Canada will maintain its
slight hawkish bias," said Camilla Sutton, chief currency
strategist at Scotiabank.
    A Reuters poll of economists released on Wednesday showed
the Bank of Canada is expected to keep its bias toward
tightening, but that slow growth and low inflation mean that an
actual rate hike will not happen until the fourth quarter of
2014. 
    Prices for Canadian government debt were mixed, with the
two-year bond losing 1 Canadian cent to yield 1.138
percent. The benchmark 10-year bond climbed 11
Canadian cents, yielding 2.432 percent.
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