CANADA FX DEBT-Canadian dollar rallies on bullish U.S. data

Thu Nov 1, 2012 11:36am EDT
 
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* C$ rises as high as C$0.9962 vs US$, or $1.0038
    * Risk sentiment returns after encouraging U.S. data
    * Bond prices ease across the curve

    By Claire Sibonney
    TORONTO, Nov 1 (Reuters) - Canada's dollar firmed versus the
greenback on Thursday after data showed the pace of growth in
the U.S. manufacturing sector picked up modestly in October,
while consumer confidence rose to its highest level in more than
four years.
    The currency rallied to as high as C$0.9962 to the
U.S. dollar, or $1.0038, from around C$0.9982, or $1.0018,
immediately before the data releases. 
    It had already been reversing early losses on positive signs
on the U.S. labor market a day before closely watched North
American employment data is released. 
    "(The Canadian dollar) seems to be taking it relatively
positively on the back of the significant uptick in risk
sentiment, so equities are obviously rallying very strongly and
the Canadian dollar is moving ... quite smartly," said Jeremy
Stretch, head of currency strategy at CIBC World Markets in
London.
    The currency, which often tracks the direction of U.S.
equities, followed Wall Street higher though U.S. market
participation remained low as investors continued to deal with
the aftermath of the massive storm Sandy. 
    At 11:05 a.m. (1505 GMT), the Canadian dollar was
at C$0.9972, or $1.0028, compared with C$0.9990, or $1.0010, at
Wednesday's North American close.
    Stretch said that for the next 24 hours the currency was
likely to hold between C$0.9930 and C$1.0020.
    The currency felt some pressure after weak Canadian gross
domestic product data in the previous session. 
    Data on Thursday also showed Canadian manufacturing growth
slowed for a fourth straight month in October and hit a
nine-month low, indicating that the third quarter's
underwhelming economic performance may continue into the end of
the year. 
    "The bigger focus will still be on Friday's employment
reports from both the U.S. and Canada. We usually see a quiet
day ahead of that," said Greg Moore, a foreign exchange
strategist at TD Securities.
    Canada likely added very few jobs in October after
back-to-back bumper gains in the previous two months, a Reuters
poll showed. 
    In the United States, U.S. job growth likely picked up as
well, but not enough to prevent the unemployment rate from
rising off a near four-year low. 
    The price of government debt drifted lower across the curve
after the encouraging data, with the two-year bond 
down 2 Canadian cents to yield 1.084 percent, and the benchmark
10-year bond falling 19 Canadian cents to yield
1.804 percent.