CANADA FX DEBT-C$ powers to 4-month high on U.S. data, ECB plan

Thu Sep 6, 2012 4:43pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ hits C$0.9809 vs US$, or $1.0195, firmest since April
    * ECB sets out bond buying program
    * U.S. service sector growth rises in August
    * U.S. private sector adds more jobs than expected in August

    By Solarina Ho
    TORONTO, Sept 6 (Reuters) - Canada's dollar rallied to a
four-month high against the greenback on Thursday, as
stronger-than-expected U.S. economic data and the European
Central Bank's plan to tackle the region's debt crisis fueled
buying of the commodity-linked currency.
    Global stock markets and commodity prices also jumped on
news of the ECB's aggressive bond-buying program and firm U.S.
data, which included a report that showed the pace of growth in
the massive U.S. service sector had accelerated in August on the
back of a rebound in employment and exports.
    "Obviously we're having a very good run in risk ...
certainly the services ISM numbers that we got out of the U.S. I
think has encouraged a more buoyant risk environment," said
Jeremy Stretch, head of foreign exchange strategy with CIBC
World Markets in London.
    The Canadian currency finished its North American
session at C$0.9828 against the greenback, or $1.0175, up nearly
a full cent from Wednesday's finish of C$0.9909, or $1.0092. It
was the currency's biggest one-day gain since June 29.
    The string of positive U.S. data helped power the currency
to a session high of C$0.9809, or $1.0195 on Thursday - its
strongest level since April 30. The currency had firmed to a
high of C$0.9843 three times in recent weeks before breaking
    The next critical level was C$0.98, said Adam Button, a
currency analyst at ForexLive in Montreal. Breaching that level
could strengthen the Canadian dollar further, he said - at least
until markets get more clarity from a U.S. Federal Reserve
meeting next week. 
    Other positive U.S. data included news that the private
sector added 201,000 jobs in August - more than economists had
expected - while the number of Americans filing new claims for
jobless benefits fell last week to the lowest level in a month.
    The data is the latest to hint that the economy of Canada's
largest export market is gaining steam even as unemployment
remains high. Both Canada and the United States will be
releasing August employment data on Friday. 
    "The market is pricing in a stronger jobs report than we
were a day ago. That can be a dangerous trade because U.S. job
numbers are often very volatile and unpredictable," Button
    "If we see strong numbers or even solid numbers ... then we
will see the Canadian dollar touch new highs for the year."
    Markets were also buoyed by confirmation the ECB agreed to
launch a new and potentially unlimited bond-buying program to
lower borrowing costs for struggling euro zone countries.
    Seeking to back up his July pledge to do whatever it takes
to preserve the euro, ECB President Mario Draghi said the new
plan, aimed at the secondary market, would address bond market
distortions and "unfounded" fears of investors about the
survival of the euro.
    "(There's) certainly a lot of optimism in Europe and that
will translate into higher commodity prices and a higher
Canadian dollar," said Button, who was nonetheless disappointed
the ECB did not offer new details.
    Canadian government bonds were lower across the curve, with
the two-year bond falling 10 Canadian cents to yield
1.163 percent. The benchmark 10-year bond price was
down 77 Canadian cents, to yield 1.838.