CANADA FX DEBT-C$ strengthens as economic data supports

Mon Dec 23, 2013 4:33pm EST

* Canadian dollar at C$1.0611 or 94.24 U.S. cents
    * Economy grows at 0.3 pct rate in Oct
    * Bond prices mostly lower across the maturity curve


    By Leah Schnurr
    TORONTO, Dec 23 (Reuters) - The Canadian dollar strengthened
against the greenback on Monday at the start of what was
expected to be a quiet week of trading as data showed the
domestic economy was stronger than expected in October.
    The loonie entered the day on firmer footing and held on to
gains after gross domestic product data showed the Canadian
economy expanded for a fourth month in October, by 0.3 percent,
beating analysts' expectations for 0.2 percent growth.
 
    "Economically, it's a good sign for the fourth quarter,"
said Greg Moore, FX strategist at TD Securities in Toronto. 
"According to our economists, it suggests the fourth quarter
could be a little bit stronger than the Bank of Canada was
expecting."
    The central bank has forecast annualized GDP growth of 2.3
percent in the fourth quarter.
    Still, the data was unlikely to change the Bank of Canada's
monetary policy after last week's weak inflation report, said
Moore.
    The Canadian dollar ended the North American
session at C$1.0611 to the greenback, or 94.24 U.S. cents,
stronger than Friday's close of C$1.0648, or 93.91 U.S. cents. 
    Trading was expected to be muted ahead of the Christmas
holiday later in the week.
    At the end of October, the Bank of Canada dropped its
rate-tightening bias, shifting to a more neutral stance and
leading market participants to delay their expectations for when
interest rates will go up.
    The policy shift has weighed on the Canadian dollar, along
with weaker commodity prices and a U.S. Federal Reserve that
last week started to wind down its economic stimulus program.
    "It's been a one-way trade against the Canadian dollar for
the last two months. As the year winds down, it's a great time
for a bounce," said Adam Button, currency analyst at ForexLive.
    "It probably won't extend a great deal from here, but, all
other things being equal, there's a little bit more room for the
Canadian dollar to run."
    Markets appeared to shrug off a cash market squeeze in
China. The country's central bank said it has injected 300
billion yuan ($49.41 billion) via short-term liquidity
operations into the interbank market on Friday in response to
rising rates, though it appeared to be trying to force banks to
curb risky lending practices in the shadow banking system.
 
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year down 4-1/2 Canadian
cents to yield 1.129 percent and the benchmark 10-year
 down 5 Canadian cents to yield 2.682 percent.
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.