CANADA FX DEBT-C$ hits another 4-year low, focus on central bank

Wed Jan 15, 2014 9:50am EST

* Canadian dollar at C$1.0953 or 91.30 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Jan 15 (Reuters) - The Canadian dollar was slightly
weaker against the greenback on Wednesday after hitting another
four-year low in overnight trade as investors were wary that the
Bank of Canada could turn more dovish at its upcoming policy
meeting.
    The loonie has been on a downward trend since late October
when the central bank abandoned any talk of rate hikes in its
policy statement after 18 months of signaling that tightening
was on the horizon.
    The selloff has intensified in recent sessions, fueled by
disappointing economic data last week that helped send the
currency through key technical barriers. In the first two weeks
of 2014, the U.S. dollar has appreciated more than 3 percent
against the Canadian currency. 
    Some profit taking limited Wednesday's decline, but
attention was turning toward next week's meeting of the Bank of
Canada. Market expectations are building that the central bank
could further soften its policy statement and perhaps step
toward an outright easing bias, said Shaun Osborne, chief
currency strategist at TD Securities in Toronto.
    "I think myself it's a little too early to expect that, I
think the Bank's going to want to see more evidence on the
inflation front before it takes that move," said Osborne.
    "But given the way Governor Poloz seems to be steering the
policy supertanker at the moment, there's very definitely a risk
of a shift at some point in the next few months."
    Bank of Canada chief Stephen Poloz earlier this month said
the central bank should keep its key interest rate on hold until
economic data persuades it otherwise. 
    The Canadian dollar was at C$1.0953 to the
greenback, or 91.30 U.S. cents, slightly weaker than Tuesday's
close of C$1.0948, or 91.34 U.S. cents. The Canadian dollar
earlier traded as far as C$1.0992, its lowest level since
September 2009.
    Strength in the U.S. dollar also pressured the loonie after 
U.S. producer prices rose in December, while separate data
showed manufacturing activity in New York state jumped this
month. The U.S. dollar index was up 0.5 percent.
 
    Canadian government bond prices were lower across the
maturity curve, with the two-year off half Canadian
cent to yield 1.059 percent and the benchmark 10-year
 down 13 Canadian cents to yield 2.601 percent.
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