Forex News

Back to Forex Market news

CORRECTED-CANADA FX DEBT-C$ cracks US$ parity, hits 2012 high on dovish Fed

27 January, 2012 - Reuters

(Corrects date in headline)

  • C$ rises to session high of C$0.9981 to US$
  • Highest level since Nov. 1
  • Lifted by Fed statement, U.S. jobless data
  • Bond prices mostly higher

    • By Jon Cook

    TORONTO, Jan 26 (Reuters) - The Canadian dollar strengthened to above parity with its U.S. counterpart on Thursday for the first time this year as weak U.S. economic data and Wednesday's move by the Federal Reserve to keep rates low until 2014 drove down the U.S. dollar.

    The Canadian currency reached its highest point in nearly three months after the U.S. central bank said it would likely keep interest rates near zero until late 2014 and Fed Chairman Ben Bernanke opened the door to further stimulus measures.

    "Risk appetite got another big boost yesterday in the Fed's clear desire to keep things as loose as possible," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada.

    Commodity-linked currencies like Canada's have risen along with investor hunger for riskier assets since the start of the year, helped by the prospect that major central banks would keep monetary policy easy to spur global growth.

    U.S. jobless data on Thursday added to expectations the U.S. Federal Reserve will keep policy easy for a long time, as weekly claims rose to 377,000, above a consensus forecast for 370,000.

    The Canadian dollar breached parity with the greenback for the first time since Nov. 1 early Thursday, rising as high as C$0.9981 to the U.S. dollar, or $1.0019. On Wednesday, the currency finished at C$1.0035 to the U.S. dollar, or 99.65 U.S. cents.

    In response to the Fed's rate-freeze extension, BMO Capital Markets predicted the Bank of Canada would likely keep its own rates on hold until late 2013, pushing back its forecast by six months.

    However, Chandler said the Bank of Canada was unlikely to lower its rate from 1 percent to be more in line with near-zero U.S. rates, reflecting Canada's stronger economic fundamentals. Higher rates tend to help currencies strengthen by attracting international capital flows.

    "Our unemployment rate is 7.5 percent, if we measured it in U.S. terms it would be about 6.5 percent and that would be very close to where they (Fed) see the unemployment rate two years from now," said Chandler.

    But analysts saw limits on the Canadian dollar's near-term gains.

    The currency's rally sparked increased buying of the greenback and selling of Canadian dollars by the corporate sector, said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets.

    The currency will likely trade around parity over the next week or two, meeting resistance near the 200-day moving average at C$0.9949 said Gavsie, adding that pressures from Europe may also halt its momentum.

    "As we do see some concern over the rest of Europe, outside of the Greek story, some of the risk-off aspects will come back into play and we will see some U.S. dollar strength," he said.

    Market focus stayed on Greek debt on Thursday. Talks on a debt swap deal with the country's private creditors resumed as the clock ticks down to a March deadline, when Greece faces major bond redemptions.

    Canadian government bond prices were mostly higher, with the two-year bond up a Canadian cent to yield 1.015 percent. The 10-year bond rose 11 Canadian cents to yield 2.031 percent.

    (Editing by Jeffrey Hodgson and 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.

    Back to Forex Market news

    Currency Converter

    select
    select
    Rate: 1.0005
    =
    Rate: 0.9995
    =
    Go
    See My FX Dashboard for more info

    Register Free

    Registration is quick and easy. Access live customer rates, free tools and make international payments.

    Register today
    Already registered? Login
    Get free rate alerts
     / 

    : Choose ccy pair and enter the exchange rate. An alert will be triggered when the exchange rate is reached and an email will be sent to you. You can unsubscribe any time and your email address is safe – see our Privacy Policy.
    Get our free commentary
    Commentary: Stay on top of the news with updates from our expert dealers on the latest currency movements. You can unsubscribe any time and your email address is safe – see our >Privacy Policy.
    Keep me up to date: RSS

    Mobile Forex trading tools

    Make money transfers or currency conversions on the go via our mobile site, iPhone or Android apps. Learn more here

    Banners

    Sitemap

    You're in good hands:

    © 2011 Copyright CanadianForex Limited

    The CanadianForex service is owned and provided by CanadianForex Limited [CN: 674939-9] ("CanadianForex"). Any reference on this page to "we", "us", or "our" is a reference to CanadianForex.

    CanadianForex is part of the global OzForex Group and is a wholly owned subsidiary of OzForex Pty Ltd (ACN: 092 375 703), an Australian company, whose shareholders include Accel Partners and the Carlyle Group in the US, and Macquarie Bank in Australia.
     
    Where any information is provided by CanadianForex, it is done so without considering the investment objectives, financial situation and particular needs of any person. Before acting on any general advice, you should consider its appropriateness to your circumstances. To the extent permitted by law, CanadianForex makes no warranty as to the accuracy or suitability of any information and accepts no responsibility for errors or misstatements, negligent or otherwise. Any quotes given are indicative only. The information may be based on assumptions or market conditions and may change without notice. No part of the information is to be construed as a solicitation to make a financial investment.

    DISCLAIMER: CanadianForex makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this web site. Read full disclaimer.

    CanadianForex provides international money transfer services to private clients and business customers. Use our free currency converter, exchange rate charts, economic calendar, in-depth currency news and updates and benefit from competitive exchange rates and outstanding customer service.