CANADA FX DEBT-C$ zips above 99 cents, bonds edge higher

Thu Apr 1, 2010 2:30pm EDT
 
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 * C$ rises to two-week high of 99.09 U.S. cents
 * Bonds tick higher, focus on Friday's U.S. jobs report
 (Updates throughout)
 By Ka Yan Ng
 TORONTO, April 1 (Reuters) - Canada's dollar popped above
the 99 U.S. cent level for the first time in almost two weeks
on Thursday, extending gains against the U.S. dollar as the
price of oil hit an 18-month high and other riskier assets
found favor.
 At 1:55 p.m. (1755 GMT), the Canadian dollar was at its
highest point since March 19, rising to C$1.0092 to the U.S.
dollar, or 99.09 U.S. cents, up from Wednesday's finish at
C$1.0158 to the U.S. dollar, or 98.44 U.S. cents.
 "The primary credit goes to the risk-on trade that's
prevailing in most markets. The Canadian dollar is enjoying the
updraft," said Eric Lascelles, chief economics and rates
strategist at TD Securities.
 Oil neared $85 a barrel, drawing fresh inflows from
investors at the start of the new quarter, while global stocks
moved higher, backed partly by upbeat European and Chinese
manufacturing data that fueled optimism about the global
economic recovery. [O/R]  [MKTS/GLOB]
 Data south of the border added to hopes for economic
recovery in the United States as jobless claims fell in the
latest week and U.S. factory activity in March hit its highest
level in more than 5-1/2 years. [ID:nN01114317]
 Taking its cue from the rise in oil, a major Canadian
export, the Canadian dollar reached its highest level since
March 19, At that time it was at its highest point since July
2008 and looked primed to test parity with the greenback.
 Liquidity looked set to wane late in the day on Thursday
ahead of the U.S. nonfarm payrolls report for March on Friday,
when Canada will be closed for the Good Friday holiday.
 "The Canadian dollar is still in its well-defined uptrend,
but vulnerable to position-squaring ahead of the long Easter
weekend," said Michael O'Neill, managing director at
Knightsbridge Foreign Exchange, a commercial foreign exchange
dealing firm.
 The Canadian dollar has begun the second quarter on a
strong note, having notched a bit more than a 3 percent gain
against the greenback in the first three months of the year.
 BONDS OUTPERFORM U.S., EYE JOBS DATA
 Canadian bond prices were flat to higher across the curve,
outperforming U.S. Treasuries, as market players waited for
Friday's U.S. jobs report and largely looked past Thursday's
stronger than expected U.S. data.
 "It's important to emphasize how small the movement is. It
does not necessarily represent a groundswell of attitude change
among investors," Lascelles said.
 "This might be some rejigging more than anything else in
advance of the weekend and (U.S.) payrolls."
 There may also be more trepidation around the U.S. jobs
data than usual, in part because most markets will be shut for
Easter.
 The two-year government bond CA2YT=RR edged up 3 Canadian
cents to C$99.59 to yield 1.722 percent, while the 10-year bond
CA10YT=RR gained 10 Canadian cents to C$101.50 to yield 3.557
percent.
 Canadian bond prices have generally been on the decline as
market players increasingly price in the probability that the
Bank of Canada will hike interest rates in July.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)