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Strategies & Market Trends : rat's nest -- Ignore unavailable to you. Want to Upgrade?

To: AugustWest who wrote (713)	1/23/2004 9:07:50 AM
From: AugustWest	Respond to of 844

(REUTERS) Canada dollar falls on rate outlook, bonds retreat TORONTO, Jan 23 (Reuters) - The Canadian dollar was down sharply against the U.S. currency on Friday, as a dovish policy update from the Bank of Canada convinced traders that domestic interest rates will fall further before the year is out. Domestic bond prices weakened, catching their breath after a strong rally this week. At 8:30 a.m. (1330 GMT), the currency was at C$1.3114 to the U.S. dollar, or 76.25 U.S. cents, its lowest level since late December. This was down from C$1.2953 to the U.S. dollar, or 77.20 U.S. cents, at Thursday's close. "It looks like there's been some delayed reaction to the central bank's words yesterday in the foreign exchange markets," said Doug Porter, senior economist with BMO Nesbitt Burns in Toronto. The Bank of Canada cut its forecast for 2004 growth steeply on Thursday and made clear it was ready to cut rates if the rising Canadian dollar squelched exports and reined in domestic demand. Some economists also ratcheted down their own expectations, and trading sentiment turned against the Canadian dollar. "Initially, the currency held up very well, but we've seen a very specific move in the Canadian dollar overnight, and while most other currencies have basically treaded water, we've seen the Canadian dollar weaken quite markedly," said Porter. The central bank's comments followed up its decision on Tuesday to cut its overnight rate to 2.50 percent from 2.75 percent, partially reducing the rate premium over the United States that has helped drive the Canadian dollar higher. The U.S. Fed Funds rate is 1 percent. The Bank of Canada next sets rates on March 2. BONDS PULL BACK AFTER RALLY Canadian bond prices were lower, retreating after a sharp weekly rise brought on by the Bank of Canada's rate cut and subsequent central bank economic downgrade. "I think it's just a little bit of a correction after a tremendous week. The move we're seeing is quite minor," Porter said. With no domestic economic data due on Friday, observers expect trade flows to take their cue from the stock market. The two-year bond slipped 8 Canadian cents to C$100.74 to yield 2.584 percent, while the 10-year bond retreated 10 Canadian cents to C$106.45 to yield 4.399 percent. The yield spread between the two-year and 10-year bond moved to 181.5 basis points from 184.7 at the previous close. The 30-year bond, due 2029, pulled back 10 Canadian cents to C$109.75 to yield 5.062 percent. The 30-year U.S. treasury yielded 4.834 percent. The three-month when-issued T-bill yielded 2.28 percent, up from 2.27 percent at the previous close. ((Reporting by Cameron French, editing by Janet Guttsman; Reuters Messaging: cameron.french.reuters.com@reuters.net, 416-941-8199)) For Reuters bond and money market pricing information double click on one of the following: <CAD=> Canadian dollar live quote, high/low <CDBN> Canadian bond prices <CDMM> <CDMN> <0#CAMMKT=> Canadian money market prices <CABONEA> Canada-U.S. spreads (live) <YLDS1> World yield index <CA30YT=RR> 30 year benchmark <0#CGB:> <CGBc1> <CA/FACTOR1> <MEIRP> - Montreal Exchange bond futures pricing information <CAMCI=> Bank of Canada monetary conditions index (Reuters calculation) <CACALL=> Canada's call loan or overnight lending rate <=CAD> Canadian dollar G10 trade-weighted index. For the fixed-income market speed guides, double click on one of the following: <CA/MMKT1> <CA/MMKT2> <CA/DEBT> <BONDS> <TREASURY> For related news, double click on one of the following: [CAN] Canadian news [NAT] North American Treasuries news [M] Money news [D] Debt news [MF] Markets news [GVD] Government debt news [MMT] Money market news [INT] Interest rate news [CEN] Central bank news [CA/] Canadian bond market stories REUTERS * end of story *