Canadian dollar closes flat, bonds down
By Frank Pingue
TORONTO, Oct 3 (Reuters) - The Canadian dollar held its
ground on Wednesday and finished relatively unchanged versus a
stronger U.S. greenback on the view that the fundamentals for
the Canadian currency remain strong.
Bond prices, with no Canadian economic data to consider,
followed the bigger U.S. treasuries market lower after data
showed showed modest growth in the U.S. labor market last
The Canadian dollar closed at 99.84 Canadian cents to the
U.S. dollar, or US$1.0016, down from 99.76 Canadian cents to
the U.S. dollar, or US$1.0024, at Tuesday's session close.
Despite the flat performance, it marked the fourth straight
session where the Canadian dollar managed to close above par
versus its U.S. counterpart.
But unlike some recent sessions where the Canadian dollar's
gains were intensified by a weaker greenback, its ability to
close steady on Wednesday came amid a modest rally in the U.S.
"Canada is hanging on very well despite a nice bounce for
the U.S. dollar today," said Steve Butler, director of foreign
exchange trading at Scotia Capital "It just goes to show you
that the fundamentals are still quite strong for Canada."
The flat performance by the Canadian dollar comes ahead of
Bank of Canada Deputy Governor David Longworth's speech in
Toronto at 8 p.m. (2400 GMT) on Wednesday.
While the market will listen to see if the Bank of Canada
has shifted its bias towards easing monetary policy ahead of
its next scheduled rate announcement on Oct. 16, few expect any
change in sentiment.
"I don't think we'll get any boat-rocking from the deputy,
especially after the governor had ample opportunity to say what
had to be said from the bank's point of view."
Last week, Bank of Canada Governor David Dodge said the
Canadian dollar's surge to parity with the greenback was not
entirely justified by economic fundamentals, which suggests the
central bank was fretting about the currency's rapid rise.
Dodge's comments also forced many economists to play down
talk of higher interest rates. The Bank of Canada, whose key
overnight rate is at 4.50 percent, will next set monetary
policy on Oct. 16.
BONDS TURN LOWER
With most bond dealers avoiding huge bets until key data
arrives later in the week, Canadian bond prices followed U.S.
treasuries lower as data from the United States offered a hint
that the threat of inflation in the United States remains.
U.S. service sector data showed more hiring and a spike in
costs, which weighed on bond prices for much of the session.
In Canada, dealers are holding off big moves as all eyes
are on Canada's September jobs report due on Friday. A U.S.
jobs report is also due at the end of the week and could offer
clues as to where North American interest rates are headed.
The two-year bond dropped 9 Canadian cents to C$100.21 to
yield 4.146 percent, while the 10-year bond fell 26 Canadian
cents to C$97.20 to yield 4.358 percent.
The yield spread between the two-year and 10-year bond
moved to 21.2 basis points from 21.9 at the previous close.
The 30-year bond dropped 47 Canadian cents to C$109.36 to
yield 4.358 percent. In the United States, the 30-year treasury
yielded 4.796 percent.
The three-month when-issued T-bill yielded 4.03 percent, up
from 4.00 percent at the previous close.