C$ firms as greenback weakens; focus on Fed

TORONTO: The Canadian dollar strengthened against a broadly weaker US dollar on Tuesday with oil prices stable and the market shifting focus toward this week's US Federal Reserve policy meeting.

The greenback fell after data showed US durable goods orders for December were weaker than expected, while quarterly results from US companies pushed the stock market into negative territory.

"Essentially (it has) given a little bit of a pause in the US dollar rally, so you're seeing US dollars in general being sold," said Brad Schruder, director, foreign exchange sales, at BMO Capital Markets in Toronto.

"But the overall theme remains the same: Look for opportunities to get short on the Canadian dollar."

Schruder said there was a slight chance the currency could dip below 1.24 during the session, but more broadly, there was no room to be bullish on Canada, he said, given the country's stimulative monetary policy.

The Bank of Canada shocked markets last week when it cut interest rates by 25 basis points to 0.75 percent. Markets are now pricing in a 62 percent chance of another rate cut in March, when the central bank makes its next policy decision.

At 9:43 a.m. EST (1343 GMT), the Canadian dollar was at C$1.2406 to the greenback, or 80.60 US cents, stronger than Monday's finish of C$1.2464, or 80.23 US cents, the weakest close in more than 5-1/2 years.

Investors will be looking for any signs of concern about the global economy in the Fed statement that is due after it finishes its two-day meeting on Wednesday. The Fed has been widely expected to raise rates sometime in mid-2015, but market chatter has increasingly questioned the feasibility of such a quick move.

"The talk on a lot of desks now is, 'is the Fed really able to continue along their desired path?'," Schruder said.

"Where central banks around the world are cutting rates, taking a dovish stance on economics forecasts, can the Fed be only entity carrying weight of the world? There's a lot of doubt they can do that."

Canadian government bond prices were higher across the maturity curve, with the two-year up 15 Canadian cents to yield 0.461 percent and the benchmark 10-year rising 53 Canadian cents to yield 1.392 percent.