CANADA FX DEBT-C$ firms after recent drop, but outlook remain weak

Mon Dec 30, 2013 9:54am EST

* Canadian dollar at C$1.0694 or 93.51 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Dec 30 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Monday, bouncing back from the
previous session's drop, though an absence of economic data is
likely to keep investors focused on the longer-term bearish
outlook for the currency.
    Trading was expected to be muted heading into the New Year's
Day holiday later in the week. Lighter liquidity can exaggerate
moves.
    There is no Canadian economic data on tap until the new
year, but investors will get a look at U.S. pending home sales
for November later in the morning. Still, the lack of
significant releases is likely to leave the Canadian currency
searching for direction.
    "I would say the market is operating at maybe 50 percent
liquidity at the moment, at best," said Darcy Browne, managing
director of foreign exchange sales at CIBC World Markets in
Toronto.
    "Based on the order books, it still seems that people are
willing to buy the dollar dips ... we still think that C$1.08,
C$1.0850 is very achievable in the near-term," said Browne. 
    The Canadian dollar was at C$1.0694 to the
greenback, or 93.51 U.S. cents, stronger than Friday's close of
C$1.0704, or 93.42 U.S. cents.
    The Canadian dollar traded as low as C$1.0728 overnight.
Analysts see the C$1.07 level as potentially providing support
for the currency.
    After losing more than 7 percent this year, many analysts
expect the loonie to continue to weaken in 2014. A more neutral
stance from the Bank of Canada and the ongoing reduction of the
Federal Reserve's economic stimulus program is seen keeping
pressure on the Canadian dollar.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1.8 Canadian
cents to yield 1.144 percent and the benchmark 10-year
 up 14 Canadian cents to yield 2.770 percent.
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