Canadian dollar slips despite weak U.S. greenback
By Frank Pingue
TORONTO, Sept 25 (Reuters) - The Canadian dollar finished
mostly unchanged despite a weaker U.S. currency on Tuesday as
investors avoided big bets ahead of a speech by Bank of Canada
Governor David Dodge.
Domestic bond prices, with no Canadian data to consider,
followed the bigger U.S. treasuries market higher after a weak
piece of U.S. data stoked expectations of another interest rate
cut by the U.S. Federal Reserve next month.
The Canadian dollar closed at C$1.0036 to the U.S. dollar,
or 99.64 U.S. cents, down from C$1.0017 to the U.S. dollar, or
99.83 U.S. cents, at Monday's close.
Early in the session the Canadian currency hit C$0.9998 to
the U.S. dollar, or US$1.0002, as the greenback buckled after
U.S. data showed a surprise plunge in U.S. consumer confidence
to nearly two-year lows.
But a drop in oil prices to below $80 a barrel and lower
gold prices weighed on the commodity-linked Canadian dollar,
which had followed oil and gold prices higher in recent weeks.
In a speech to the Vancouver Board of Trade, Dodge said the
central bank would have to examine the effect of the strong
Canadian dollar on the economy when setting monetary policy.
While the speech had little impact on the currency, the
question and answer period that follows could give the domestic
currency some direction heading into the overnight session.
"I think a lot of people are waiting to see if Dodge says
anything interesting," said George Davis, chief technical
strategist at RBC Capital Markets.
"If anything ... we could see a little bit more volatility
as the Asian session starts because that is sort of going to be
the window when Dodge takes questions."
Since the Bank of Canada left its key rate steady at 4.50
percent in September, the U.S. Federal Reserve cut its rate 50
basis points to 4.75 percent and the Canadian dollar reached
parity with the greenback for the first time in 31 years.
Canadian bond prices took their cue from U.S. treasuries
and finished higher as the weak U.S. data supported the idea of
another Fed rate cut in October.
And with no Canadian data due until the end of the week,
domestic bond prices will likely continue to follow the lead of
U.S. treasuries and North American equity markets.
The only Canadian data due this week will arrive on Friday
when July gross domestic product, August industrial producer
prices and raw materials data are due for release.
The two-year bond rose 3 Canadian cents to C$100.22 to
yield 4.143 percent, while the 10-year bond climbed 7 Canadian
cents to C$97.00 to yield 4.383 percent.
The yield spread between the two-year and 10-year bond
moved to 24.0 basis points from 23.3 at the previous close.
The 30-year bond gained 3 Canadian cents to C$108.85 to
yield 4.459 percent. In the United States, the 30-year treasury
yielded 4.903 percent.
The three-month when-issued T-bill yielded 4.03 percent,
from 4.06 at the previous close.