CANADA FX DEBT-C$ near 1-week high on upbeat U.S. data

Thu Nov 1, 2012 4:45pm EDT
 
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* C$ ends at C$0.9968 vs US$, or $1.0032
    * C$ touches session rises as high as C$0.9962 vs US$, or
$1.0038
    * Risk sentiment returns after encouraging U.S. data
    * Canadian bond prices flat

    By Claire Sibonney
    TORONTO, Nov 1 (Reuters) - Canada's dollar firmed to a near
one-week high versus the greenback on Thursday after bullish
U.S. consumer confidence and private-sector jobs data fired up
riskier assets heading into crucial North American employment
reports on Friday.
    U.S. companies added jobs in October at the fastest pace in
eight months, according to payrolls processor Automatic Data
Processing, a sign of modest healing in the labor market just
days before a presidential election that could hinge on the
economy. 
    "Certainly the ADP was stronger than expected today which I
think is rubbing up expectations for non-farm (U.S. payrolls),
particularly since ADP has changed their methodology and is now
supposed to have a much better correlation with non-farm," said
Camilla Sutton, chief currency strategist at Scotiabank.
    "I think the Canadian numbers will end up playing second
fiddle to non-farm just because of how important non-farm is
right now to Federal Reserve policy."
    Other data on Thursday showed a sharp improvement in
consumer confidence and a drop in new claims for jobless
benefits, while there were mixed signals regarding the health of
U.S. manufacturing.
    "(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. 
    The Canadian dollar ended the North American
session at C$0.9968, or $1.0032, compared with C$0.9990, or
$1.0010, at Wednesday's close. The currency touched an intraday
high of C$0.9960, or $1.0040, its strongest level since Oct. 26.
    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. 
    
    OCTOBER JOB GAINS EXPECTED
    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. 
    Sutton noted that a better-than-expected U.S. number could
help the U.S. dollar against Canada's, since it would weigh
against the need for an extensive easing program by the Fed,
seen as negative for the U.S. dollar.
    In that case, however, the Canadian dollar would still
benefit on the crosses against other major currencies because of
its close ties to the United States, its largest trading
partner.
    The price of government debt was little changed across the
curve with the two-year bond flat to yield 1.074
percent, and the benchmark 10-year bond also
unchanged to yield 1.783 percent.