Canadian Forex Review: C$ Firms

By Commodity News Service Canada


Winnipeg – February 26/13 – CNS – The Canadian dollar was

trading at a fractionally firmer level versus the US currency in

late North American activity on Tuesday. The minor upswing in the

value of the Canadian dollar came amid mixed views on statements

made by US Federal Reserve Chairman Ben Bernanke during the

session, market watchers said.


The US dollar moved to a new seven-month high against the

Canadian dollar early Tuesday as Bernanke reiterated his

commitment to the Fed’s bond-buying program, arguing that the

benefits of stimulus still outweigh the risks.


However, the upward push on the US dollar was short-lived as

such bond-buying programs, quantitative easing as they are known,

are generally seen as corrosive to a currency, because they are

viewed in the market as printing money. The US dollar retracement

in turn helped to firm the Canadian currency, brokers said.


The Canadian currency late in the afternoon was quoted at

C$1.0260 (97.46 US cents). This compares with Monday’s late North

American quote of C$1.0265 (97.41 US cents).


The upside in the Canadian unit was also helped along by the

general firmness of the North American equity sector. Small

declines in global crude oil values did slow the recovery in the

Canadian dollar.


Canadian bonds pushed higher across the yield curve on

Tuesday as US Federal Reserve Chairman Ben Bernanke signalled

that the Fed’s bond-buying stimulus policies would continue,

market watchers said..


Canada’s two-year bond yield was at 1.007% Tuesday, from

1.017% Monday. The 10-year bond yielded 1.853%, from 1.865%. Bond

yields move inversely to bond prices.


Bernanke, who was testifying in Washington Tuesday, defended

the Fed’s open-ended bond-buying program, saying the associated

risks don’t outweigh the benefit of “promoting a stronger

economic recovery and more-rapid job creation.”


Minutes from the January meeting of the US Fed’s

policy-setting body revealed a growing divide among officials

about the future of the Fed’s open-ended bond-buying program.

Some had called for an earlier end to the program, saying it

creating more risks than benefits for the economy and financial

markets.


Bernanke’s testimony Tuesday suggested continued demand for

Treasurys to keep up with the Fed’s purchasing program.

END