CANADA FX DEBT-C$ weakens with focus on Fed policy path

Thu Nov 14, 2013 9:35am EST

* C$ at C$1.0498 vs US$, or 95.26 U.S. cents
    * Bond yields mixed across the maturity curve

    By Leah Schnurr
    TORONTO, Nov 14 (Reuters) - The Canadian dollar weakened
against the greenback on Thursday, retreating from overnight
gains as earlier optimism that the U.S. Federal Reserve will
remain accommodative for some time wore off.
    Investors had their attention focused on the U.S. Senate
Banking Committee hearing scheduled for 10:00 a.m. EST (1500
GMT) on the nomination of the Fed's current vice chair, Janet
Yellen, to head the U.S. central bank. 
    In prepared remarks released on Wednesday, Yellen offered a
defense of the Fed's economic stimulus efforts, supporting
market expectations the central bank may not start to reduce its
bond buying until next year. 
    "The broad consensus is that Yellen has the same mindset as
Bernanke, if not possibly a little more dovish on the economy,"
said Scott Smith, senior market analyst at Cambridge Mercantile
Group in Calgary.
    Still, those dovish expectations are well priced into the
market at this point, said Smith.
    "We saw a little bit of a jump in risk-correlated assets
overnight with her prepared testimony, but to some extent that
didn't materially change the view of the broader market, so
we've seen some give back this morning."
    The Canadian dollar is seen benefiting from continued
quantitative easing as it boosts appetite for risk assets and
dampens demand for the U.S. dollar.
    The Canadian dollar gave back the previous
session's strong advance and was at C$1.0498 to the greenback,
or 95.26 U.S. cents, weaker than Wednesday's close of C$1.0462,
or 95.58 U.S. cents. 
    The loonie's reaction to domestic economic data was muted
after Canada's trade deficit in September dropped by more than
half as exports grew at a much faster rate than imports.
 
    The two-year bond was up half a Canadian cent to
yield 1.106 percent, while the benchmark 10-year bond
 slipped 6 Canadian cents to yield 2.587 percent.
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