CANADA FX DEBT-C$ stronger as Fed hints on hiking rates

Wed Jun 18, 2014 4:41pm EDT

* Canadian dollar at C$1.0850 or 92.17 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds strategist comment, updates after Fed policy news)
    By Alastair Sharp
    TORONTO, June 18 (Reuters) - The Canadian dollar gained
ground on the greenback on Wednesday as the U.S. Federal Reserve
hinted at a slightly faster pace of interest rate hikes starting
next year and slowed its stimulus efforts.
    "For Canada, the takeaway is likely that they still see a
fairly robust outlook for U.S. economic growth and for Canada
that is fairly positive," said Camilla Sutton, chief currency
strategist at Scotiabank.
    The Fed slashed its forecast for 2014 U.S. growth but said
the recovery was on track and it should be able to raise rates
in 2015. It also lowered the amount of bond-buying it will make
to stimulate growth to $35 billion per month, from $45 billion
currently. 
    The loonie, as Canada's currency is colloquially known,
gained roughly a quarter of a cent post-Fed news,
notwithstanding some initially volatile trading.
    It ended the session trading at C$1.0850 to the
U.S. dollar, or 92.17 U.S. cents, stronger than Tuesday's close
of C$1.0864, or 92.05 U.S. cents.
    Data showing Canadian wholesale prices rose twice as fast as
expected in April had no noticeable impact ahead of the Fed
release. 
    The currency has traded in a narrow band over the past week
but could accelerate its losses if it crosses resistance at
C$1.0880, or 91.91 U.S. cents, said Greg Moore, senior currency
strategist at Royal Bank of Canada in Toronto.
    Looking past the Fed, Canadian market watchers will be
waiting for domestic inflation and retail sales data due on
Friday for any signs of price pressures that could prompt the
Bank of Canada to revise its own take on rates. Currently,
market players don't expect a rate hike until well into 2015.
    "For us, we'd have to see more evidence of the U.S. recovery
flowing into Canada," Scotia's Sutton said. "Inflation is
essentially at target but Governor Poloz is very quick to
highlight the potential downside risk."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 28 Canadian
cents to yield 1.098 percent and the benchmark 10-year
 up 41 Canadian cents to yield 2.268 percent.

 (Additional reporting by Cameron French; Editing by James
Dalgleish and Chris Reese)
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.