CANADA FX DEBT-C$ little changed as investors mull Fed move

Thu Jan 30, 2014 10:00am EST

* Canadian dollar at C$1.1163 or 89.58 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Jan 30 (Reuters) - The Canadian dollar was little
changed on Thursday after earlier hitting a 4-1/2-year low
against the greenback as worries about global growth left the
currency trading in a tight range.
    The loonie was also hampered by increased risk aversion
globally as the U.S. Federal Reserve's move to further cut its
economic stimulus weighed on emerging markets again on Thursday.
    Growth worries were offset somewhat by data that showed
household spending and rising exports helped the U.S. economy
grow at a 3.2 percent annual rate in the fourth quarter, in line
with expectations. Still, that emphasized expectations the Fed
will continue unwinding its bond-buying program. 
    Emerging markets assets have been sold off in recent days on
a combination of country-specific problems and concerns that
less bond-buying by the Fed will reduce the liquidity that has
boosted emerging market assets. 
    Nonetheless, the Fed said on Wednesday it will cut its asset
purchases by another $10 billion. 
    "With the increased volatility and turmoil in emerging
markets, six months ago, that might have had a different effect
on the Fed," said Scott Smith, senior market analyst at
Cambridge Mercantile Group in Calgary.
    "At this point, I think the Fed has told markets, 'We're
going to be trying our best to unwind this thing throughout 2014
and it's going to take a lot more than a little shake-up in
emerging markets and one soft jobs report to have us materially
change our course.'"
    The developments out of emerging markets and the Fed have
put pressure on the loonie as investors worry about the
prospects for global growth and a divergence in monetary policy
between the United States and Canada, said Smith.
    Still, the currency was able to consolidate in early
Thursday trade. The Canadian dollar was at C$1.1163 to
the greenback, or 89.58 U.S. cents, slightly firmer than
Wednesday's close of C$1.1178, or 89.46 U.S. cents. 
    The loonie fell as low as C$1.1199 in overnight trade, its
lowest level since July 2009. The currency has made fresh
4-1/2-year lows in three sessions in a row.
    The session low was just short of the psychologically
important C$1.12 area. 
    Adding to growth concerns, data overseas showed business
conditions for China's manufacturers worsened in January,
pointing to a weak start to the year for the world's
second-largest economy. 
    Investors will get a look at Canada's gross domestic product
for November on Friday.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 2 Canadian
cents to yield 0.973 percent and the benchmark 10-year
 was down 12 Canadian cents to yield 2.380 percent.
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