CANADA FX DEBT-C$ holds steady vs US$, bond yields rise on Fed prospects

Tue Jun 10, 2014 5:02pm EDT

* Canadian dollar close at C$1.0904 or 91.71 U.S. cents
    * Bond prices fall across the maturity curve

    By Solarina Ho
    TORONTO, June 10 (Reuters) - The Canadian dollar held steady
against the greenback in muted trading on Tuesday but moved more
against other currencies, including the euro, while bond yields
rose as market attention turned toward the prospect of higher
U.S. interest rates.
    The Canadian dollar firmed against the euro, which was under
pressure after the European Central Bank cut interest rates to
record lows last week.  
    Traders' bracing for potential signs of a Fed rate hike
earlier than forecast helped push U.S. government bond yields to
one-month highs, which in turn drew demand for U.S. dollars.
 
    "You had a mixed risk tone today. Bond yields continued to
back up, but if you look at equity markets, they were softer
most of the day and very little in data, so we ended up just
chopping around with the currencies," said Mark Chandler, head
of Canadian fixed income and currency strategy at RBC Capital
Markets.
    The Canadian dollar finished Tuesday's session at 
C$1.0904 to the greenback, or 91.71 U.S. cents, little changed
from Monday's close of C$1.0908, or 91.68 U.S. cents.
    The currency was at around C$1.4771 against the European
currency after Monday's close of C$1.4821, but it
weakened against its commodity-currency peers, the Australian
and New Zealand dollars .
    "I think cross-flows are acting as a bit of a restraint on
USD/CAD. We think generally speaking, USD/CAD is looking quite
supported in the C$1.08-figure area," said Shaun Osborne, chief
currency strategist at TD Securities.
    Traders will eye U.S. retail sales and comments from Bank of
Canada's Stephen Poloz on Thursday for further direction. The
market is expecting positive retail news, which could push the
U.S. dollar higher and weaken the Canadian dollar.
    "Poloz may potentially say something on the currency, or the
view on monetary policy. When he has in the past, it has usually
meant a weaker Canadian dollar," Chandler noted.
    Canadian government bond prices were weaker across the
maturity curve, with the two-year down 2 Canadian
cents to yield 1.080 percent and the benchmark 10-year
 down 22 Canadian cents to yield 2.345 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway and Dan
Grebler)
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.