CANADA FX DEBT-C$ rallies with commodities, hits record vs euro

Fri Jul 13, 2012 4:21pm EDT
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* C$ at C$1.0146 vs US$, or 98.56 U.S. cents
    * Touches highest since July 5
    * C$ climbs to record high against euro
    * Bond prices lower across the curve

    By Jennifer Kwan
    TORONTO, July 13 (Reuters) - The Canadian dollar rose to a
one-week high against the U.S. currency on Friday and a record
peak against the euro after Chinese economic data eased investor
worries about global growth concerns.
    Global stocks and commodity prices rose across the board as
China gross domestic product data came in line with
expectations. The euro gained against the U.S. dollar for the
first time in four days on Friday, bouncing from a two-year low
on a rebound fueled by the Chinese data.  
    "Today what we have is a somewhat weaker U.S. dollar across
the board and the commodity bloc of currencies doing fairly
well, really because the Chinese data were not as bad as the
whisper number," said Camilla Sutton, chief currency strategist
at Scotiabank.
    China's economy grew at its slackest pace in more than three
years, highlighting the need for more growth-oriented policy
vigilance from Beijing, a prospect which boosted prices for key
Canadian exports like oil and copper.  
    "The rumor yesterday was that it was wildly going to
disappoint, and so not having disappointed to that extent,
combined with the potential for further stimulus is positive for
global growth currencies," added Sutton.
     The Canadian dollar ended at C$1.0146 versus the
greenback, or 98.56 U.S. cents, up from Thursday's close at
C$1.0186 against the U.S. dollar, or 98.17 U.S. cents. The
currency rose about 0.5 percent for the week.
    Against the euro, the Canadian dollar advanced to
C$1.2370, or 80.84 euro cents, its strongest level against the
common currency since it was created in January 1999.
    Global stocks, currency and commodity markets shrugged off a
survey that showed U.S. consumer sentiment cooled again in early
July to its lowest in seven months. 
    For the Canadian dollar, analysts said the Bank of Canada
meeting on Tuesday is the biggest near-term risk.
    A Reuters poll showed the Bank of Canada is expected to keep
interest rates on hold until the second quarter of 2013 as a
slowing global economy hurts the domestic outlook and as
Ottawa's new mortgage rules take pressure off the central bank
to cool the country's housing market. 
    "Rates are on hold pretty firmly right now. What basically
the market will be looking for is how the messaging will have
changed," said Greg Moore, foreign exchange strategist at TD
    "Clearly the global outlook is going to be a little bit
softer so the Bank of Canada is going to have to recognize that
in terms of their own outlook. But we still maintain that the
forward-looking language is going to stick with the message that
the next move will be up instead of down for rates." 
    The rate announcement shouldn't weigh on the currency unless
the central bank becomes "a little more dovish," added Moore,
who expects the Canadian dollar to trade in a range of C$1.01 to
C$1.0250 versus the greenback up until the central bank's rate
    Canadian bond prices were slightly lower across the curve,
tracking similar action in U.S. Treasuries where debt prices
fell as the rebound in stocks diminished the safe-haven appeal
of bonds. 
    The two-year government bond was off 5 Canadian
cents to yield 0.991 percent, while the benchmark 10-year bond
 was down 7 Canadian cents to yield 1.638 percent.