CANADA FX DEBT-C$ pierces US$ parity on data, stimulus hope

Fri Aug 3, 2012 9:49am EDT
 
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* C$ climbs to high of $1.0003, strongest since May
    * Hope for U.S., European stimulus keeps C$ at lofty levels
    * Trades near recent record high against euro
    * Bond prices lower across curve

    By Jennifer Kwan
    TORONTO, Aug 3 (Reuters) - Canada's dollar traded at a
stronger level than the U.S. currency on Friday for the first
time in more than 2 months as U.S. jobs data offered signs of
strength while still fueling investors hopes of central bank
action to boost the economy.
    The currency climbed to a high of C$0.9997 to the
greenback, or $1.0003, its strongest level since May 15, after
the U.S. data.
    Nonfarm payrolls rose 163,000 last month, beating economists
expectations for a 100,000 gain. The report was dimmed somewhat,
however, by the increase in the jobless rate to 8.3 percent from
8.2 percent in June, even as more people gave up the search for
work. 
    The stronger-than-extended jobs growth suggested the economy
of Canada's largest trading partner continues to expand. But
some think the higher jobless rate could still pressure the U.S.
Federal Reserve to try to boost the economy with a third round
of bond purchases.
    "That's got investors thinking we'll see the Fed stepping in
later in the year to provide stimulus, so that's increasing risk
appetite and weakening the U.S. dollar across the board," said
Darren Richardson, a senior corporate dealer at CanadianForex.
    The Fed this week stopped short of offering new monetary
stimulus even as it signaled further bond buys could be in
store.
    At 9:20 a.m. (1320 GMT), the Canadian dollar was at
C$1.0006, or 99.94 U.S. cents, higher than Thursday's North
American finish at C$1.0072, or 99.29 U.S. cents. 
    The Canadian dollar traded near record high levels of
C$1.2189 against the euro, or 82.04 euro cents, which
it hit on Thursday.
    "Even though the ECB didn't really change their stance
yesterday, the market is still clinging to the hope of the ECB
taking action, combined with the Fed later in the year," he
said.
    "As always, if we do see unexpected negative data coming
form the peripheral economies we'll see the U.S. dollar rebound
immediately as risk comes off.
    "It really is a day-to-day testing of risk sentiment."
    European shares and the euro surged and Spanish bond yields
eased off their highs on Friday as investors decided the ECB was
committed to tackling the region's debt crisis despite taking no
action this week. 
    The two-year bond fell 8 Canadian cents to yield
1.101 percent, and the benchmark 10-year bond 
dropped 54 Canadian cents to yield 1.731 percent.