CANADA FX DEBT-C$ firms in U.S. holiday trade, outlook stays weak

Thu Nov 28, 2013 4:37pm EST

* C$ at C$1.0587 vs US$, or 94.46 U.S. cents
    * Bond prices higher across the maturity curve


    By Leah Schnurr
    TORONTO, Nov 28 (Reuters) - The Canadian dollar firmed
modestly in quiet trade against the greenback on Thursday,
though it stayed near four-month lows as a number of fundamental
factors suggested the outlook for the currency is still weak. 
    With U.S. bond and stock markets closed for the Thanksgiving
holiday, investor focus turned to Friday's Canadian gross
domestic product report, which is expected to show the economy
grew at a 2.5 percent annualized rate in the third quarter.
    The only domestic news on the docket for Thursday was a
report on Canada's current account deficit, which shrank in the
third quarter, though the second-quarter deficit was
substantially larger than previously reported. 
    The loonie had little reaction to the data and consolidated
through the session. After trading as weak as C$1.0603 on
Wednesday, analysts say the currency faces resistance at
C$1.0609, which was hit in July.
    "We more or less approached and retested the calendar high
in dollar-Canadian dollar," said Jack Spitz, managing director
of foreign exchange in Toronto.
    "Does this represent the high for the year once again, will
it be rejected? I have a sense the GDP number tomorrow will go a
long way in terms of whether or not that level does get rejected
again."
    Some market watchers anticipate Friday's figures will come
in above consensus of 2.5 percent growth, including National
Bank, which forecasts 2.7 percent.
    The Canadian dollar ended the North American
session at C$1.0587 to the greenback, or 94.46 U.S. cents,
stronger than Wednesday's close of C$1.0595 or 94.38 U.S. cents.
    The Canadian currency has lost nearly 3 percent since late
October, hurt by a retreat in the Bank of Canada's hawkish tilt
and expectations that the U.S. Federal Reserve will soon move to
withdraw some monetary stimulus.
    The policy shift from the Bank of Canada has markets
expecting interest rates will stay at 1 percent into 2015.
 
    "We have the Canadian dollar weakening modestly over the
next six months ... and then it starts to retrace that move in
the second half of next year," said Camilla Sutton, chief
currency strategist at Scotiabank in Toronto.
    Goldman Sachs earlier in the week suggested the Canadian
dollar could fall to C$1.14 a year from now as commodity prices
are likely to sag.
    The two-year bond was up 1-1/2 Canadian cents to
yield 1.091 percent, while the benchmark 10-year bond
 rose 9 Canadian cents to yield 2.538 percent.
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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