CANADA FX DEBT-C$ breaks out of recent range to hit 2-week high

Tue Apr 29, 2014 10:01am EDT

* Canadian dollar at C$1.0970 or 91.16 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, April 29 (Reuters) - The Canadian dollar
strengthened to a nearly two-week high against the greenback on
Tuesday, breaking out of its recent range as investors
positioned for a busy week that could shed insight on monetary
policy on both sides of the border. 
    After trading sideways in recent weeks, the gains brought
the Canadian dollar close to breaking through its 100-day moving
average. The currency had been content to hover around the
C$1.10 level in recent sessions as investors weighed a modest
strengthening of domestic economic data against the central
bank's still-neutral policy stance.
    Investors will get a chance to assess that stance this week
with Bank of Canada policymakers due to answer questions from
parliamentarians on Tuesday and Wednesday. Bank Governor Stephen
Poloz and Deputy Senior Governor Tiff Macklem were set to face
the House of Commons finance committee at 3:30 EDT (1930 GMT) on
Tuesday.
    Later in the week, markets will take in a policy statement
from the U.S. Federal Reserve as well as Canadian monthly gross
domestic product figures and a slew of U.S. economic data.
    "I think there's lots of a reshifting of risk positions just
leading into the amount of risk we have in the next 24 hours -
everything from Governor Poloz, to the Fed, to inflation data
out of Europe," said Camilla Sutton, chief currency strategist
at Scotiabank in Toronto.
    The Canadian dollar hit a 4-1/2-year low in March before
bouncing higher, though that rally had largely lost momentum
this month.
    "The weak Canadian dollar story has certainly faded over the
last several weeks, and increasingly it's a far more neutral
outlook and that's seeing some position unwinding of those who
have been short the Canadian dollar for some time now," Sutton
said.
    The Canadian dollar was at C$1.0970 to the
greenback, or 91.16 U.S. cents, on Tuesday morning, stronger
than Monday's close of C$1.1025, or 90.70 U.S. cents.
    The Canadian dollar entered the year as a favorite short
trade for some investors and many analysts still expect it to
weaken substantially before the end of 2014. 
    There would need to be either a build in positive sentiment
over the currency or a shift away from Poloz's dovish stance to
suggest that a bullish turn is taking place for the Canadian
dollar, Sutton said.
    "We haven't seen really either of those, so I think for now
for the U.S. dollar-Canadian dollar, it's still a story of
either side of C$1.10 as a very comfortable place." 
    Canadian government bond prices were lower across the
maturity curve, with the two-year off Canadian cents
0.8 to yield 1.081 percent and the benchmark 10-year 
down 6 Canadian cents to yield 2.455 percent.

 (Editing by Peter Galloway)
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