CANADA FX DEBT-Hawkish executive bank supports C$, hits some debt

Tue Oct 23, 2012 11:40am EDT

* C$ during C$0.9926 contra a US$, or $1.0075

* Bank of Canada mostly binds to hawkish line on rates

* Global expansion fears erase early C$ rally

By Alastair Sharp

TORONTO, Oct 23 (Reuters) ? The Canadian dollar reason steady
versus a U.S. banking while short-term debt prices fell on
Tuesday after a Bank of Canada astounded markets by largely
retaining a hawkish perspective that seductiveness rates should be raised
over time.

The executive bank, highlighting mountainous domicile debt,
repeated many of a rate-hike denunciation that has done it an
outlier among vital economies, while creation a time support for
rate hikes reduction definite.

The Canadian dollar had enervated after Governor Mark Carney
omitted anxiety to a executive bank?s tightening disposition in a
speech a week ago.

?Obviously they kept a hawkish bias, that we consider took
the markets by surprise, so we?ve had a convene in a Canadian
dollar,? pronounced Camilla Sutton, arch banking strategist at
Scotiabank.

The banking traded as clever as C$0.9901 to the
greenback, or $1.0099, after a executive bank statement, from
C$0.9970 only before.

But by midday it had enervated behind to C$0.9926 contra the
US$, or $1.0075, unvaried from Monday?s close.

While a bank?s expansion and acceleration opinion was slightly
more downbeat, a comparatively certain altogether tinge and absence
of any explanation on Europe astounded some investors.

?It was a tiny peculiar since information right now is not really
supportive of rate hikes ? a U.S. is still muddling along,
Europe is in a retrogression and Chinese expansion is a tiny slower
than expected,? pronounced Darcy Briggs, a Calgary-based fixed-income
fund manager with Bissett Investment Management, a section of
Franklin Templeton.

SHORT-TERM DEBT PRICES HIT

The currency?s gains were singular by a broader convene in the
safe-haven U.S. dollar after muted corporate gain and a
downgrade of Spanish regions re-ignited fears about a health
of a universe economy.

Still, a Canadian dollar was stronger opposite many major
currencies, including a euro, British pound
, Swiss franc and Australian dollar
.

?Given a fact that we?ve got a flattering green mood in the
global markets today, that?s a flattering critical pierce by the
Canadian dollar,? pronounced Doug Porter, emissary arch economist at
BMO Capital Markets.

The Bank of Canada news also strike short-term supervision bond
prices, while longer-term prices were upheld by broader
caution.

The two-year bond was off 8 Canadian cents to
yield 1.136 percent, while a benchmark 10-year bond
rose 18 Canadian cents to produce 1.853 percent.

?The prolonged finish is still being upheld by a bit of weakness
in other financial markets currently some-more broadly, though a brief end
got walloped by this,? BMO?s Porter said.

Notwithstanding a knee-jerk greeting in a session,
Bissett?s Briggs pronounced he did not expect poignant movement
in bond yields in a nearby tenure as he expects a executive bank
to continue to reason rates steady.

?The jury?s still out, from my vantage point,? he said.

Overnight index swaps, that trade formed on expectations for
the executive bank?s pivotal process rate, showed that after the
announcement traders resumed fixation tiny bets on the
possibility of a rate travel in 2013.

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Source: http://financeroll.com/news/25577/canada-fx-debt-hawkish-central-bank-supports-c-hits-some-debt

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