CANADA FX DEBT-C$ firms but outlook stays weak after Fed move
* Canadian dollar at C$1.0666 or 93.76 U.S. cents * Bond prices mostly lower across the maturity curve By Leah Schnurr TORONTO, Dec 19 (Reuters) - The Canadian dollar closed firmer against the greenback on Thursday, bouncing up from a 3-1/2-year low, though the outlook for the currency was still seen as bearish after the U.S. Federal Reserve's decision to start scaling back its economic stimulus program. The Fed announced on Wednesday it will modestly trim its quantitative easing program, known as "QE", which has been a significant driver of global markets across asset classes this year. The Fed tried to temper reaction to the move by suggesting its key interest rate would stay low for even longer than it had promised. The reduction in Fed bond-buying is seen as a negative for the Canadian dollar because it is expected to direct capital flows to the U.S. currency on the expectation of higher returns. The loonie weakened following Wednesday's announcement and hit its lowest level since May 2010 in the overnight session. "After the move yesterday, we were looking for a bit of a retracement in dollar-Canadian dollar," said David Bradley, director of foreign exchange trading at Scotiabank in Toronto. "This is just a bit of a correction and over the course of the next 10 days or so, with the holiday-thin market, we can probably have a chance to trade back up toward C$1.075, C$1.08." The Canadian dollar ended the North American session at C$1.0666 to the greenback, or 93.76 U.S. cents, stronger than Wednesday's close of C$1.0689, or 93.55 U.S. cents. The Canadian dollar was also stronger against its major currency pairings. Sentiment for the loonie has been generally bearish in recent months, with the currency hit by expectations the Fed would withdraw stimulus and a more dovish shift from the Bank of Canada that has left analysts expecting that interest rates at home will stay low for longer. Canadian government bond prices were mostly lower across the maturity curve, with the two-year down 6-1/2 Canadian cents to yield 1.137 percent and the benchmark 10-year down 20 Canadian cents to yield 2.705 percent.
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