CANADA FX DEBT-C$ firmer on strong resources, data, equities

Fri Oct 1, 2010 9:37am EDT
 
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   * C$ edges higher to 97.44 U.S. cents
 * Bonds flat to lower after firm Chinese, U.S. data
 By Jennifer Kwan
 TORONTO, Oct 1 (Reuters) - Canada's dollar climbed against
the U.S. currency on Friday morning, supported by a broadly
weaker greenback and gains in commodity and equity prices after
firm U.S. and Chinese data.
 Jack Spitz, managing director of foreign exchange at
National Bank Financial, said the key factor keeping the
Canadian currency afloat was a weaker U.S. dollar, which aided
oil and gold prices higher. [O/R] [GOL/]
 "Firmer commodities, widespread selling of the U.S. dollar
continue to keep dollar/Canada offered," he said.
 At 9:10 a.m. (1310 GMT), the Canadian dollar CAD=D4 was
at C$1.0263 to the U.S. dollar, or 97.44 U.S. cents, up from
Thursday's finished at C$1.0290 to the U.S. dollar, or 97.18
U.S. cents.
 The greenback accelerated losses against the euro on Friday
after New York Federal Reserve Bank President William Dudley
said more Fed action is warranted unless the U.S. economic
outlook improves. [FRX/] [ID:nN30290786] For Dudley's comments,
see [ID:nNLL1LE6II].
 However, Spitz noted the Canadian currency is largely
underperforming against major crosses on lowered market
expectations the Bank of Canada will hike rates in October.
 Markets are pricing in an 89 percent probability the bank
will hold rates steady on Oct. 19, based on a Reuters
calculation using overnight index swaps.BOCWATCH
 That sentiment was bolstered by Bank of Canada Governor
Mark Carney, who said on Thursday record high household-debt
levels and a soft U.S. export market mean modest economic
growth for Canada in the months ahead, suggesting further
interest rate hikes will likely be delayed. [ID:nN30286204]
 "Canada's underperformance can be attributed to the
cautious approach now being taken by the central banker which
is now pricing in little to no chance of a bank hike on October
19," said Spitz.
 Spitz said the currency would look to the performance of
North American equity markets for further direction throughout
the day.
 Toronto's resource-heavy main stock index rose on Friday as
stronger-than-expected Chinese manufacturing data eased
concerns about the global recovery, lighting a fire under
commodity prices. [.TO]
 Canadian government bond prices were flat to lower,
mirroring moves in U.S. Treasuries, where debt futures dipped
on the back of the Chinese data and better-than-expected U.S.
numbers. [US/]
 The two-year bond CA2YT=RR ticked 2 Canadian cents lower
to yield 1.379 percent, while the 10-year bond CA10YT=RR sank
35 Canadian cents to yield 2.798 percent.
 (Editing by Jeffrey Hodgson)