Reuters: US Dollar Report: CANADA FX DEBT-C$ strengthens ahead of jobs, but weakness forecast

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CANADA FX DEBT-C$ strengthens ahead of jobs, but weakness forecast Nov 6th 2013, 21:56 Share this Email Print Reprints Wed Nov 6, 2013 4:56pm EST * C$ at C$1.0440 vs US$, or 95.79 U.S. cents * Bond prices mixed across curve By Solarina Ho TORONTO, Nov 6 (Reuters) - The Canadian dollar strengthened against the U.S. dollar in subdued trade on Wednesday, bolstered in part by positive economic data, but is seen weakening in the coming weeks and months as bond yields are likely to slip back toward those of its southern neighbor and main trading partner. The pace of purchasing activity in Canada jumped in October to 62.8 from 51.9 in September, far exceeding analysts' expectations for a 51.0 reading. A figure above 50 indicates an increase in the pace of activity. Increased plans for housing construction helped edge the value of Canadian building permits up by 1.7 percent in September. It was the seventh monthly advance for building permits since the start of 2013, yet the total value in September was only 0.2 percent higher than in September 2012, according to Statistics Canada. "The news wasn't too bad on both sides of the border ... So we'll see where we go over the next two days with the remaining data," said Don Mikolich, executive director, foreign exchange sales CIBC World Markets. "The market needs to see continued progress on Canadian economic numbers to move further into the Canadian dollar and with the Bank of Canada put a bit of a cloud over the forecast last week." The Canadian dollar closed at C$1.0418 versus the greenback, or 95.99 U.S. cents, compared with C$1.0458, or 95.62 U.S. cents, at Tuesday's North American close. The Canadian dollar, which was mostly outperforming its major currency counterparts, will take further direction from North American data , including key employment figures on Friday. In a Reuters poll released on Wednesday, the currency was seen slipping to C$1.06 a year from now as the combined effect of tighter future U.S. monetary policy and no imminent rate hikes in Canada take hold. While much attention in coming weeks will be on whether the U.S. Federal Reserve will start to trim back its monetary stimulus, Greg Moore, currency strategist at TD Securities, said the Bank of Canada's recent dropping of a rate-hike bias would likely cause weakness in the Canadian currency as short-term bond yield spreads tighten. "The Canadian yield advantage is on an eroding trend and that should continue perhaps a little more sharply after the messaging we heard in the past couple of weeks," he said. The two-year bond was up 2 Canadian cents to yield 1.120 percent, while the benchmark 10-year bond was flat, yielding 2.537 percent. Link this Share this Digg this Email Reprints

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