CANADA FX DEBT-C$ extends rally as risk appetite firm

Fri May 1, 2009 9:23am EDT
 
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 * C$ rallies to 84.52 U.S. cents
 * Touches highest level in nearly 4 months
 * Move exaggerated in thin trade
 * Bond prices lower ahead of U.S. data
 (Adds details, quote)
 TORONTO, May 1 (Reuters) - The Canadian dollar shot higher
versus the U.S. dollar on Friday as optimism the economy may be
stabilizing convinced traders to buy currencies perceived as
higher-risk.
 The domestic currency rallied as high as C$1.1832 to the
U.S. dollar, or 84.52 U.S. cents, which marked its highest
level since Jan. 9.
 The move higher added to gains recorded during the past two
sessions, but Friday's trade was believed to be exaggerated
given the thin and relatively volatile trading with some
European markets closed for the May Day holiday.
 At 9:05 a.m.. (1305 GMT) the Canadian unit was at C$1.1891
to the U.S. dollar, or 84.10 U.S. cents, up from C$1.1930 to
the U.S. dollar, or 83.82 U.S. cents, at Thursday's close.
 The Canadian dollar's run-up, however, appeared more a
result of U.S. dollar weakness rather than any Canadian dollar
specific fundamentals, like higher oil prices or upbeat
domestic data.
 Instead, with U.S. stock futures pointing to a higher open,
on Friday on optimism the economic slump is waning, investors
opted to snap up the currencies regarded as higher risk, like
the Australian and Canadian dollars.
 "Most of the other majors are higher against the (U.S.)
dollar generally, so it's not really much Canada-specific
today," said Adam Cole, global head of FX strategy at RBC
Capital Markets in London. "So it's generally, mostly a (U.S.)
dollar phenomenon more than a Canadian dollar phenomenon."
 BOND PRICES LOWER
 Canadian bond prices, with no domestic data to consider,
were lower across the curve alongside the bigger U.S. Treasury
market ahead of a monthly U.S. manufacturing report that could
stir more optimism on the economic recovery there.
[ID:nL114913]
 "This is one of the more useful forward looking indicators
and a very comprehensive peek at businesses. From that
perspective, it's just really an important subset of the
economy and a sign of economic health," said Eric Lascelles,
chief economics and rates strategist at TD Securities.
  With large debt issuance in the United States and Canada
next week, supply concerns are also pressuring prices,
strategists said.
 The two-year Canada bond was largely flat, down 2 Canadian
cents at C$100.53 to yield 0.993 percent, while the 10-year
sank 24 Canadian cents to C$105.40 to yield 3.121 percent.
 The 30-year bond pulled back 45 Canadian cents at C$119.40
to yield 3.862 percent. In the United States, the 30-year
Treasury yielded 4.0880 percent.
 (Reporting by Jennifer Kwan and Frank Pingue; Editing by
Kenneth Barry)