CANADA FX DEBT-C$ nudges higher as U.S. jobs data helps

Thu Oct 11, 2012 5:08pm EDT
 
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* C$ closes at C$0.9787 to the US$, or $1.0218
    * Data on Canadian trade deficit, U.S. jobless claims helps
    * Spain under pressure to seek bailout after S&P downgrade
    * Poll shows global growth expectations still limited

    By Alastair Sharp
    TORONTO, Oct 11 (Reuters) - The Canadian dollar closed
slightly stronger versus the U.S. currency on Thursday, tracking
a rebound in world equity markets after a drop in U.S. jobless
claims increased optimism about the outlook for Canada's main
trading partner.
    The resources-linked currency was also helped by positive
jobs data from fellow metals exporter Australia and by Standard
& Poor's ratings downgrade of Spain, which traders calculated
would push the country to seek aid and unleash a bond-buying
program by the European Central Bank. 
    "The market's still on a sugar high that this ECB
bond-buying program is going to be the cure for Europe's
problems," said Gareth Sylvester, a senior currency strategist
at Klarity FX in San Francisco.
    The Canadian currency closed at C$0.9787 to the
greenback, or $1.0218, up from its North American close of
C$0.9807, or C$1.0197, on Wednesday.
    Canada's dollar was helped by news that the number of
Americans filing new claims for unemployment benefits fell
sharply last week to the lowest level in more than 4-1/2 years.
 
    A narrower-than-expected Canadian trade deficit also helped
support the currency below C$0.98 to the greenback, though a
drop in imports suggested an economy struggling to cope with
weak international markets and slowing domestic demand.
 
    Additional support came from stronger metal and energy
prices. Copper bounced from two-week lows, gold snapped a
four-day slip and oil prices rose to their highest levels in
weeks.   
    "The Spain downgrade caught a few people off guard," said
Steve Butler, director of foreign exchange trading at
Scotiabank. "But risk has come roaring back."
    A global Reuters poll of hundreds of economists pointed to a
slight improvement in worldwide growth next year, with focus on
whether China can pull out of a downtrend and whether the euro
zone can contain its prolonged debt crisis. 
    With investors moving towards riskier assets, Canadian
government bond prices fell. The two-year bond 
slipped 3 Canadian cents to yield 1.151 percent, while the
benchmark 10-year bond edged 10 Canadian cents lower
to yield 1.804 percent.