By Frank Pingue
TORONTO, Aug 7 (Reuters) - The Canadian dollar closed a
touch higher against the greenback on Tuesday as U.S. Federal
Reserve comments on inflation did not trigger a significant
move ahead of key Canadian jobs data due later this week.
Bond prices, with no Canadian data to dictate direction,
ended lower as the Fed statement was not as dovish inflation as
markets had expected.
The Canadian dollar closed at C$1.0535 to the U.S. dollar,
or 94.92 U.S. cents, up from C$1.0545 to the U.S. dollar, or
94.83 U.S. cents, at Friday's session close.
The currency spent the session in a tight range of C$1.0530
to C$1.0571 as the widely expected Fed decision to leave rates
unchanged and a statement that said inflation remained its main
concern did not prompt a sharp move.
And with key Canadian employment data not due until Friday,
the Canadian dollar is expected to remain in a tight range over
the next two sessions.
The Canadian economy is expected to have added 20,000 jobs
in July, compared with a bigger-than-expected gain of 34,800 in
June, according to a Reuters survey.
"The market will now look at new credit news being revealed
or, probably more importantly, waiting for the employment data
on Friday for new direction," said Matthew Strauss, senior
currency strategist at RBC Capital Markets. "It seems the
market is very comfortable in this range at the moment."
BONDS STUCK LOWER
Canadian bond prices were given a bit of a boost as the Fed
statement acknowledged downside risks to growth had risen, but
still closed down as inflation remained the central bank's main
"The Fed made it clear that its main concern is inflation
and that it's not prepared to cut interest rates unless things
get worse," said Sal Guatieri, senior economist at BMO Capital
Markets. "The main message is that things aren't bad enough to
have the Fed come to the market's rescue."
While the jobs report is the key data piece in Canada this
week, Guatieri said housing data on Thursday is expected to be
strong and could help cement prospects for a Bank of Canada
rate hike in September.
The new housing price index for June and July housing
starts data for July are both due on Thursday.
The two-year bond dropped 1 Canadian cent to C$98.51, to
yield 4.614 percent, while the 10-year bond fell 8 Canadian
cents to C$96.22 to yield 4.479 percent.
The yield spread between the two-year and 10-year bond
moved to -13.5 basis points from -14.5 at the previous close.
The 30-year bond dropped 21 Canadian cents to C$110.39 to
yield 4.372 percent. In the United States, the 30-year treasury
yielded 4.923 percent.
The three-month when-issued T-bill yielded 4.64 percent, up
from 4.62 percent at the previous close.