Reuters: US Dollar Report: CANADA FX DEBT-C$ firms on global data as Bank of Canada holds rates

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CANADA FX DEBT-C$ firms on global data as Bank of Canada holds rates Sep 4th 2013, 21:15 Wed Sep 4, 2013 5:15pm EDT * C$ at C$1.0492 vs US$, or 95.31 U.S. cents * Bank of Canada holds benchmark rate at 1 pct * Bank says global economic uncertainty hampers growth * Poll shows C$ expected to weaken slightly in coming months By Solarina Ho and Leah Schnurr TORONTO, Sept 4 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as it played catch-up with a rally in other commodity-linked currencies on upbeat economic data, while investors began to look ahead to crucial jobs data due at the end of the week. The market took a no-surprise policy statement from the Bank of Canada on Wednesday in its stride. The central bank maintained its overnight target rate at 1 percent, as expected, and upheld a vague rate-hike bias with language identical to its July policy announcement. It said, however, that Canada's economic revival was taking longer than expected. "No one was looking for a change in the overnight rate, obviously, and they kept the forward-looking language entirely intact," said Andrew Kelvin, senior fixed income strategist at TD Securities. "On the margins, it was a bit on the dovish side, but really it's steady as she goes." The bank did note that uncertain global economic conditions were hampering Canadian export growth and business investment. The bank is expected to keep interest rates at current levels until the fourth quarter of 2014, according to a Reuters poll of 35 economists last week. The Canadian dollar ended the session trading at C$1.0492 versus the U.S. dollar, or 95.31 U.S. cents, firmer than Tuesday's North American finish of C$1.0530, or 94.97 U.S. cents. "Closing below C$1.05 may indicate we're due for a little bit of a retrenchment," said Don Mikolich, executive director, foreign exchange sales at CIBC World Markets. "We've had support at C$1.0475, C$1.0450, so those would be our next immediate targets." The Canadian dollar, which is expected to weaken slightly in the coming months according to a Reuters poll released on Wednesday, outperformed most other currencies. Its commodities-linked sister currencies, the Australian and New Zealand dollars, were notable exceptions. A string of more positive global economic data so far this week, including a better-than-expected Australian economic growth report, have given growth-sensitive currencies a boost and the Canadian dollar has benefited from that, said Camilla Sutton, chief currency strategist at Scotiabank. "They're very, very strong. After the Bank of Canada statement, which I think was fairly neutral to the Canadian dollar, that just allowed Canada to play catch-up with the uncertainty out of the way," she said. After the Bank of Canada statement, investors were shifting their focus to jobs reports due on Friday both at home and in the United States. Data released south of the border on Thursday will give an early look at the U.S. labor market, with reports on weekly unemployment claims and private sector hiring for August. A strong figure on Friday in the full U.S. employment report for August could reinforce expectations that the U.S. Federal Reserve will begin to slow its economic stimulus program before long. Friday's data is forecast to show the Canadian economy added 20,000 jobs in August, rebounding from the sharp drop of 39,400 the month before. The unemployment rate is expected to hold steady at 7.2 percent. "Anything from 15,000 to 20,000 would be considered a positive and a bounce-back," Mikolich said. "I think we just have to have that reinforcement that the recovery is coming." Prices for Canadian government debt slipped, with the two-year bond off 3-1/2 Canadian cents to yield 1.241 percent and the benchmark 10-year bond off 27 Canadian cents to yield 2.718 percent. Link this Share this Digg this Email Reprints

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