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CANADA FX DEBT-C$ holds above parity though Greek fears weigh

03 February, 2012 - Reuters
Adds details, analyst comments)
  • C$ ends at C$0.9996 to the US$, or US$1.0004
  • Greek debt fears weigh, U.S. jobless claims lift
  • Market awaits Canada, U.S. jobs data on Friday
  • Bond prices mostly lower

    • By Jon Cook

    TORONTO, Feb 2 (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Thursday, unable to firm further above parity as concerns over Europe's debt crisis offset encouraging U.S. jobs data and remarks viewed as bullish from Federal Reserve Chairman Ben Bernanke.

    Market sentiment dipped after Greek debt talks were reported as difficult, heightening concerns that Athens would not be able to meet 14.5 billion euros ($19.1 billion) in bond redemptions due next month.

    Bernanke's testimony to Congress on Thursday partly assuaged investor fears of a messy Greek default after the Fed Chairman said he was seeing signs that some of the uncertainty dampening U.S. business investment, including European banking woes, might be waning.

    Last week, Bernanke gave the U.S. economy a tonic by keeping the Fed's ultra-low interest rate on hold until the end of 2014. On Thursday, U.S. data showed new jobless claims fell more than expected last week, restoring some confidence in the recovery.

    The Canadian dollar finished at C$0.9996 to the U.S. currency, or US$1.0004, down slightly from Wednesday's close at C$0.9991 to the U.S. dollar, or US$1.0009.

    The currency has been unable to bridge a key technical level near its 200-day moving average at C$0.9961 to help it move higher.

    "There's a lot of resistance to a sharp move," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada.

    Chandler added that some of the pushback against a higher Canadian dollar would be in the form of profit-taking by foreign investors looking to sell their Canadian assets should the currency rise significantly.

    A deteriorating European scenario was seen as the main factor knocking the Canadian dollar below parity with the greenback over the next few months, a Reuters poll of foreign exchange strategists showed.

    Median forecasts in the poll showed the currency at C$1.01 to the U.S. dollar, or 99.01 U.S. cents, in one and six months from now, before drawing even with the U.S. currency by the end of the year.

    "If we get a collapse in the euro it's going to have a hard time staying below parity," said David Bradley, a director of foreign exchange trading at Scotia Capital.

    Bradley predicted the Canadian dollar would drop over the next few months before rebounding to end the year around C$0.980 to the U.S. dollar.

    Market watchers were looking ahead to Friday's January unemployment numbers in Canada and the United States to further gauge the health of the North American economy.

    In Canada, the median forecast is for the economy to have generated 23,100 net new jobs in January, up from 21,700 in December.

    "We think there will be less firing than is seasonally normal from the holiday season, mostly because there was less hiring going into it," said Chandler, who predicted 30,000 new jobs for Canada.

    Government bond prices were mostly lower, with the two-year bond down three Canadian cents to yield 0.992 percent. The 10-year bond fell 35 Canadian cents to yield 1.944 percent.

    Editing by Rob Wilson)

    Copyright Thomson Reuters 2012. All rights reserved.

    The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

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