CANADA FX DEBT-C$ hits five-month high as dovish Fed hurts greenback

Thu Jun 19, 2014 4:39pm EDT

* Canadian dollar ends at C$1.0823 or 92.40 U.S. cents
    * Bond prices mixed across the maturity curve

 (Adds quotes, details)
    By Cameron French
    TORONTO, June 19 (Reuters) - The Canadian dollar hit a
five-month high versus the U.S. currency on Thursday as
investors shied away from the greenback following a dovish tilt
in U.S. Federal Reserve statements the day before, while the
market awaited key Canadian data due on Friday.
    The Canadian currency, which has traded in a narrow range
over the past week, was jarred higher after the Fed on Wednesday
lowered its projections for the long-run target interest rate,
presenting a less hawkish tone than many had expected.
 
    "(The Canadian dollar) has followed along primarily with the
U.S. dollar selling we've seen right across the board following
the FOMC," said Ken Wills, currency strategist and broker at
CanadianForex in Toronto.
    The currency topped out at C$1.0810, or 92.51 U.S.
cents, early on Thursday, touching its highest level since
January.
    It ended the session at C$1.0823 to the greenback, or 92.40
U.S. cents, up from Wednesday's close of C$1.0850, or 92.17 U.S.
cents.
    The market looked past Canadian data showing a lower ratio
of household debt to income in the first quarter, a trend that
will likely ease worries at Canada's central bank and finance
ministry about an over stretched housing market. 
    But reports due on Friday on Canadian inflation and retail
sales will be closely watched 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.
    "A really strong number may give the market reason to test
the C$1.08 level," said Wills. If the currency moves decisively
past C$1.0810 to the U.S. dollar, it could open up a move
towards the next key level of C$1.0780, he said.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year up 4.2 Canadian
cents to yield 1.083 percent and the benchmark 10-year
 down 7 Canadian cents to yield 2.272 percent.   
    

 (Editing by Chris Reese)
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