CANADA FX DEBT-C$ up slightly, but range-bound ahead of jobs data

Wed Jul 9, 2014 4:32pm EDT

* Canadian dollar at C$1.0660 or 93.81 U.S. cents
    * Bond prices lower across the maturity curve
    * Fed minutes had little impact on loonie

 (Updates to close, adds analyst comment)
    By Andrea Hopkins
    TORONTO, July 9 (Reuters) - The Canadian dollar strengthened
modestly against the greenback on Wednesday, though the currency
was expected to hew to a narrow range with investors turning
their attention to the domestic employment report at the end of
the week.
    North American stocks rose, lifting a global equities gauge
as the Federal Reserve detailed its plan to allow a
strengthening economy to fend for itself, while Brent fell as
Libyan oil pumps came back online. 
    Minutes from the most recent Fed meeting showed the U.S.
central bank has begun detailing plans to ease the world's
largest economy out of an era of loose monetary policy, while
its asset purchases will likely end in October. 
    While that pushed stocks higher, the Canadian currency ended
the day only slightly stronger against its U.S. counterpart.
    "It's vaguely stronger on the day, but it's had a fairly
narrow range and what we're seeing is broad-based U.S. dollar
weakness, aggravated by the minutes for some," said Camilla
Sutton, chief currency strategist at Scotiabank.
    "Net net, the minutes had a very limited impact, and the
broader  move has been stronger equities and broad-based U.S.
dollar weakness."
    The Canadian dollar ended the North American
session at C$1.0660 to the greenback, or 93.81 U.S. cents,
slightly stronger than Tuesday's close of C$1.0677, or 93.66
U.S. cents.
    Reaction to Wednesday's Canadian housing data was muted
after a report showed housing starts unexpectedly rose in June.
 
    The loonie is expected to be constrained until Friday's
employment report and, beyond that, next week's Bank of Canada
meeting. The economy is forecast to have added 20,000 jobs last
month.
    Investors are waiting to see how the Bank of Canada will
react to recent surprisingly strong inflation data after the
central bank has repeatedly flagged its concerns about the low
inflation environment.
    "Employment on Friday is going to be just a preamble for the
Bank of Canada next week," said Martin Schwerdtfeger, FX
strategist at TD Securities.
    "For the Bank of Canada, we think they are going to balance
once again inflation coming higher relative to their previous
projections with GDP coming lower."
    Analysts expect that will allow the central bank to maintain
the neutral tone it has held since October.
    "They have no incentive whatsoever to modify market
expectations at this point in time," said Schwerdtfeger.
    Canadian government bond prices were mixed, with the
two-year off 1.5 Canadian cent to yield 1.123 percent
and the benchmark 10-year up 2 Canadian cents to
yield 2.250 percent.

 (Additional reporting by Leah Schnurr; Editing by Nick
Zieminski and Chris Reese)
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