* C$ ends up at C$0.9797 to the U.S. dollar, or $1.0207
* Bond prices up as equity strength fades, Europe weighs
* TD pushes BoC rate hike forecast to July 2012 from Jan
By Ka Yan Ng
TORONTO, Aug 17 Canada's dollar edged higher
against the U.S. currency on Wednesday, supported by rallying
risk assets, although anxiety over the state of the global
economy restrained the gain.
The nervousness, however, helped push up government of
Canada bond prices.
Early in the session, the currency rose as high as C$0.9776
to the U.S. dollar, or $1.0229, its highest level in more than
a week. It then backed down to near its 200-day moving average
From around noon onward, the Canadian dollar held in a
modest 27-point range and was an underperformer among major
"The drivers are probably a little bit mixed up, but all in
all we've got a little bit stronger oil prices and stronger
equities and a general kind of easing in market fears," said
Camilla Sutton, chief currency strategist at Scotia Capital.
"But I think the biggest driver by far is broad-based U.S.
The Canadian currency CAD=D4 ended the session at
C$0.9797 to the U.S. dollar, or $1.0207, up from Tuesday's
North American finish of C$0.9821 to the U.S. dollar, or
The price of oil was up on the day, but off early highs,
while North American stocks were mostly higher but also off the
INTEREST RATES TO RISE, NOT FALL
Investors are looking forward to clues about government
spending plans and interest rates this Friday when Finance
Minister Jim Flaherty and Bank of Canada Governor Mark Carney
testify at the House of Commons finance committee, which is
looking into the impact on Canada of foreign economic turmoil.
Analysts expect the two men to acknowledge the economic
slowdown, but not markedly change their cautious tones.
"I think (Carney) will certainly want to leave the
impression that they are not considering actively easing
(interest rates) at the present time," said David Watt, senior
currency strategist at RBC Capital Markets.
A spate of soft economic data has reduced the already slim
chance that the Bank of Canada will raise interest rates this
year. Canada's big banks all forecast now that there will be no
rate hikes until next year. On Wednesday, TD Securities went
further and pushed back its forecast for a Bank of Canada rate
hike in January by six months to July.
But the swaps market still sees the possibility that the
Bank of Canada's next move, along with many other central
banks, will be an interest rate cut because of the mounting
fears of a global slowdown. [ID:nN1E77B11K] BOCWATCH
Scotia's Sutton said the rate cut expectations worldwide
would probably start to fade in the short term.
BOND PRICES SPIKE
Safe-haven flows to Canadian bonds were also supported by
some disappointment that France and Germany, at a summit
meeting on Tuesday, had stopped short of increasing the size of
the euro zone's rescue fund and had rejected for now the idea
of a common euro bond. [ID:nL5E7JG0IH]
Canada's two-year bond CA2YT=RR rose 8 Canadian cents
to yield 0.955 percent, while the 10-year bond CA10YT=RR
advanced 57 Canadian cents to yield 2.394 percent.
A C$3.5 bln tranche of two-year government of Canada bonds
met with solid demand on Wednesday as safe-haven demand
remained firm as concern mounted over the state of the global
(Reporting by Ka Yan Ng; editing by Peter Galloway)