CANADA FX DEBT-C$ at 2-mth high vs US$ amid risk rally

Thu Jul 19, 2012 8:18am EDT
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* C$ hits high of C$1.0069 vs US$, or 99.31 U.S. cents
    * Bond prices edge lower across the curve

    By Claire Sibonney
    TORONTO, July 19 (Reuters) - The Canadian dollar climbed to
a more than two-month high against the U.S. dollar on Thursday,
eyeing parity again as it benefited from positive global
equities amid a busy reporting calendar and broad weakness in
the greenback.
    Pressure remained on the U.S. dollar after Federal Reserve
Chairman Ben Bernanke kept alive talk of more monetary easing in
the second stage of his testimony to the U.S. Congress on
Wednesday, which also boosted commodities priced in U.S.
    "What we see today really is a combination of just
generalized U.S. dollar weakness against most of the G10
currencies and a moderately better tone for risk and all of that
adds up really to (U.S.) dollar/Canada being lower," said Adam
Cole, global head of FX strategy at RBC Capital Markets in
    Meanwhile, the Bank of Canada kept its rate-hike stance in
the previous session, despite other major advanced economies
moving in the opposite direction. 
    Higher interest rates typically help a country's currency
appreciate because they often attract international capital
    Traders also looked to equities for direction on
growth-related currencies like Canada's. European shares hit
11-week highs as second-quarter company results lifted
sentiment, while U.S. stock futures also pointed to a firmer
open after the S&P 500 touched its highest level since early May
on Wednesday.  
    On the data front, investors will watch Canadian wholesale
trade for May, and U.S. weekly jobless claims, home sales and
factory activity later in the day.
    At 8:03 a.m. (1203 GMT), the Canadian dollar stood
at C$1.0076 against the U.S. dollar, or 99.25 U.S. cents, firmer
than Wednesday's North American finish at C$1.0107 versus its
U.S. counterpart, or 98.94 U.S. cents.
    Earlier, the domestic currency touched C$1.0069, or 99.31
U.S. cents, its strongest level compared to the greenback since
May 16.
    After closing through the 200-day moving average on
Wednesday, Cole noted, the Canadian dollar could revisit parity
- a psychological resistance level - against its U.S.
counterpart in the near term, as long as risk appetite continues
to improve. Before that, it would have to test a retracement
level around C$1.0050.
    Against the euro, Canada's dollar was near a record peak hit
earlier this week, hitting an intraday high of C$1.2374, or
80.81 euro cents.
    A sharp rise in Spain's borrowing costs on Thursday sent the
euro broadly lower. Despite all the efforts by Madrid to cut its
budget deficit and tackle problems in its banking system,
government bond yields rose sharply at an auction of two- to
seven-year debt. 
    Canadian bond prices dropped across the curve, with the
two-year government bond off 2 Canadian cents to
yield 0.971 percent, and the benchmark 10-year bond 
down 18 Canadian cents to yield at 1.639 percent.