CANADA FX DEBT-C$ at nearly 3-month high after Fed minutes

Wed Apr 9, 2014 4:37pm EDT

* Canadian dollar at C$1.0872 or 91.98 U.S. cents
    * Bond prices mixed across the maturity curve

 (Recasts with move higher; adds details on FOMC, quote; updates
prices)
    By Leah Schnurr
    TORONTO, April 9 (Reuters) - The Canadian dollar
strengthened against the greenback on to its highest level in a
nearly three months after minutes from the Federal Reserve's
latest policy meeting suggested rate hikes south of the border
may not come as soon as some had feared.
    The minutes sent the Canadian dollar to a session high and
propelled it to its fourth straight day of gains. Since hitting
a 4-1/2-year low in late March, the Canadian dollar has
rebounded by more than 3 percent. 
    Recent stronger-than-expected economic data and better risk
appetite has also helped improve sentiment for the loonie,
prompting some investors to cover their short positions. 
    The minutes of the March policy meeting released on
Wednesday showed the Federal Reserve was worried that investors
would overreact to published forecasts that suggested a more
aggressive cycle of interest rate increases.
    At a press conference after that meeting, Fed Chair Janet
Yellen had said the "considerable time" between when the U.S.
central bank ends its bond-buying program and when it raises
rates could be around six months, depending on the economy, a
definition that rattled markets. 
    "Literally a month ago we were thinking the FOMC was pretty
adamant about rate hikes sooner rather than later," said Rahim
Madhavji, president at KnightsbridgeFX.com in Toronto.
    "Now it just creates a little bit more uncertainty and that
may not be the case. There might be accommodative policy for
some time, possibly longer than people expected, and that's got
the loonie rallying."
    A faster time frame for the Fed raising rates is seen as
hurting the loonie because it would benefit the U.S. dollar.
    The Canadian dollar ended the North American
session at C$1.0872 to the greenback, or 91.98 U.S. cents,
stronger than Tuesday's close of C$1.0922, or 91.56 U.S. cents.
    The currency climbed as high as C$1.0858, its best level
since mid-January.
    With a light economic calendar in the coming days, attention
was turning to the Bank of Canada's policy announcement next
Wednesday. The central bank's more dovish stance has been a
major driver of the currency in recent months, and investors
will be watching to see if the bank alters its tone.
    Madhavji expects the Canadian dollar to trade in the C$1.08
to C$1.11 range leading up to the meeting. It will be difficult
for the currency to get past the C$1.08 mark until investors get
something more concrete from the Bank of Canada, though that is
unlikely to happen next week, he said.
    "As long as they don't react negatively to the rise in the
Canadian dollar and as long as they don't discount the strong
economic data that we've seen in Canada over the last several
weeks, that in and of itself would be positive for the Canadian
dollar," Madhavji said.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year up 2 Canadian cents
to yield 1.071 percent, while the benchmark 10-year 
was down 5 Canadian cents to yield 2.467 percent.

 (Editing by Leslie Adler)
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