Reuters: US Dollar Report: CANADA FX DEBT-C$ retreats as rate hike "less imminent"

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CANADA FX DEBT-C$ retreats as rate hike "less imminent" Oct 24th 2012, 20:47 Wed Oct 24, 2012 4:47pm EDT * C$ ends at C$0.9949 versus US$, or $1.0051 * C$ slides on comment by Bank of Canada head * Global growth worries add to C$ weakness * Bond prices climb, outperform Treasuries By Claire Sibonney TORONTO, Oct 24 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday after the head of the Bank of Canada said the case for raising interest rates was "less imminent." The currency hit a session low after the central bank's governor, Mark Carney, made the comment in a news conference, citing weak third-quarter growth and more slack in the economy. "When Carney said that the case for raising rates is less imminent, that jolted the market," said David Watt, chief economist for HSBC Canada. Overnight index swaps, which trade based on expectations for the central bank's key policy rate, showed that after the report and Carney's comments traders scaled back bets on a rate hike in late 2013. Earlier in the day, Canada's dollar had hit its strongest level since last Friday as traders cheered the bank's decision on Tuesday to retain hawkish language in its rate-setting statement. The bank's tightening stance contrasts sharply with the monetary easing on offer in the United States and most other developed economies. But Carney's comment qualifying the central bank's view quickly knocked the currency lower. "We've taken back some of the impact we had yesterday," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada. "It was basically off of comments which the market took to heart today but really wasn't much different from what the bank had talked about before, that rate hikes weren't imminent," he said. C$ RALLY UNWINDS A Reuters poll on Wednesday showed most of Canada's primary dealers still expect the Bank of Canada to hold off raising interest rate until late next year or 2014. The Canadian dollar ended the North American session at C$0.9949 to the greenback, or $1.0051, compared with C$0.9927, or $1.0074, at Tuesday's North American close. The currency at one point hit a session low of C$0.9959, or $1.0041. The currency underperformed most other majors. Support for the Canadian dollar is still seen near U.S. dollar parity, around the 100- and 200-day moving averages. The Canadian dollar's weakness was compounded on signs that the euro zone is heading toward a deeper recession than previously feared. This contributed to a broader rise in the safe-haven greenback against most major currencies. [MKTS/GLOB} Short-term Canadian government debt prices received a boost from Carney's comments, outperforming U.S. Treasuries. The two-year bond rose 5 Canadian cents to yield 1.118 percent, while the benchmark 10-year bond gained 4 Canadian cents to yield 1.847 percent. Link this Share this Digg this Email Reprints

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