CANADA FX DEBT-C$ hits 7-mth high, set for best month of 2012

Fri Apr 27, 2012 5:10pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ ends at C$0.9810 vs US$, or $1.0194
    * Best weekly gain since early March; April gain 1.7 pct
    * Soft U.S. GDP data weakens greenback
    * Bank of Canada outlook supports
    * C$ long positions at highest since 2005

    By Jon Cook	
    TORONTO, April 27 (Reuters) - Canada's dollar hit a
seven-month high against its U.S. counterpart on Friday and was
on track for its best month this year after the greenback slid
broadly on signs of flagging U.S. growth.	
    First-quarter U.S. economic growth cooled as businesses cut
back on investment and restocked shelves at a slower pace.
    The GDP data came on the heels of Thursday's disappointing
U.S. jobless claims report, raising expectations that the Fed
could launch another round of monetary easing, which would
likely be negative for the greenback.	
    "A generally weak U.S. dollar on the back of the GDP report
leaves the door open to further dovishness from the Fed," said
Camilla Sutton, chief currency strategist at Scotiabank. "The
Canadian dollar has rallied a fair bit over the last few
    The latest sign of investor bullishness on the Canadian
currency appeared in data from the Commodity Futures Trading
Commission. It showed net long positions in the Canadian dollar
rose to 44,224 contracts in the latest week, the highest level
since the end of 2005, as currency speculators cut U.S. dollar
    The Canadian dollar finished at C$0.9810 versus the
U.S. dollar, or $1.0194, up from Thursday's finish at C$0.9840
against the greenback, or $1.0163. It touched a session high at
C$0.98, its strongest level since Sept. 19.	
    With one session left in April, the currency was up 1.7
percent and headed for its best monthly gain this year. It rose
1.1 percent on the week, its best showing since early March.	
    The Canadian dollar shrugged off euro zone debt worries
after Spain's credit rating suffered another downgrade and data
on Friday revealed nearly 25 percent of the debt-ravaged
nation's workforce is unemployed. 	
    Earlier this week Fed Chairman Ben Bernanke said the U.S.
central bank "would not hesitate" to launch another round of
bond purchases to drive borrowing costs lower if it looked like
the economy needed it. 	
    By contrast, Bank of Canada Governor Mark Carney maintained
the bank's "hawkish bias" when he addressed a business audience
in Ottawa, said Sutton.	
    Carney repeated his warnings about excess household debt as
Canadians take out mortgages at extremely low borrowing rates,
saying the country should heed the lessons of the U.S. housing
    The Bank of Canada surprised investors earlier this month
with a more positive Canadian economic outlook and explicit
warning that it may have to start raising interest rates again.	
    "The Bank of Canada turning a touch more hawkish has been
driving a lot of that appreciation," said Charles St-Arnaud,
Canadian economist and currency strategist at Nomura Securities
International in New York.	
    He added next week's U.S. non-farm payroll numbers would be
watched closely as a further gauge of the strength of the
American recovery effort.	
    Canadian government bond prices were mostly lower. Canada's
two-year bond fell 10 Canadian cents to yield 1.427
percent, while the benchmark 10-year bond dropped 35
Canadian cents to yield 2.092 percent.