CANADA FX DEBT-C$ firms with eyes on Fed speakers

Fri Jan 3, 2014 9:42am EST

* Canadian dollar at C$1.0620 or 94.16 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Jan 3 (Reuters) - The Canadian dollar strengthened
against the greenback on Friday, retracing some of the previous
day's decline as investors awaited a round of speeches from U.S.
policymakers that could provide insight into the path of
monetary policy south of the border.
    Trading volumes were not expected to return to usual yet
with some investors still on holiday and others impacted by the
major snowstorm that hit the U.S. northeast. 
    Market action has been choppy in recent sessions, leaving
the loonie in a trading range even as it closed out 2013 as the
currency's weakest year since 2008.
    With little else on the economic calendar, investors will
take in speeches from a number of U.S. Federal Reserve officials
later in the day, including outgoing Fed Chairman Ben Bernanke.
    "People, as they always do, will pay quite a bit of
attention to what he says," said Greg Moore, FX strategist at TD
Securities in Toronto.
    "With tapering starting a little sooner than consensus
expected last month, the market will be looking for a little bit
more clarity on how quickly tapering will progress through the
year." 
    The Canadian dollar was at C$1.0620 to the
greenback, or 94.16 U.S. cents, stronger than Thursday's close
of C$1.0673, or 93.69 U.S. cents.
    Overseas, data showed growth in China's services sector fell
to a four-month low in December, suggesting the world's
second-largest economy lost momentum at year's end.
 
    The Canadian dollar enters 2014 with most analysts expecting
the currency will come under more pressure, hurt by the
combination of a dovish Bank of Canada and the gradual unwinding
of the Fed's economic stimulus.
    Key themes for the loonie will be whether Canadian inflation
remains tame and what stronger U.S. economic data will mean for
the pace of tapering, said Moore.
    "In the case that we do see an extension of this low
inflation theme in Canada and continued strength in U.S.
economic activity, we could see a quicker pickup in U.S.
dollar-Canadian dollar," which could put the Canadian dollar at
C$1.08 in the next couple of months, said Moore.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 3-1/2 Canadian
cents to yield 1.144 percent and the benchmark 10-year
 down 31 Canadian cents to yield 2.782 percent.
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