CANADA FX DEBT-Canada dollar gains on oil, risk appetite

Tue Feb 2, 2010 5:04pm EST
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 * C$ rises slightly to 94.51 U.S. cents
 * Bonds mixed, mostly outperform U.S. Treasuries
 (Updates to close, adds quotes)
 By Claire Sibonney
 TORONTO, Feb 2 (Reuters) - Canada's currency rose against
the U.S. dollar on Tuesday as influential commodity prices
firmed and positive U.S. economic data fueled investor appetite
for riskier assets.
 "Some of the overseas currencies managed to make some gains
against the greenback partly reflecting growing confidence
about the sustainability of the recovery, carry-over from some
of the stronger economic data that were seen yesterday," said
Paul Ferley, assistant chief economist at Royal Bank of
 He was referring to Monday's data that showed U.S.
manufacturing expanded in January at its fast pace since 2004.
Ferley also noted that the Canadian dollar ticked higher on
news of an expected rise of existing U.S. pending home sales in
December. [ID:nN02242571]
 "Strength of the U.S. economy seems to increase risk
appetite for other currencies," he said.
 Rising oil prices also had an impact on the
commodity-linked currency. Oil rose more than 3 percent to
nearly $77 a barrel, gaining for the second session on optimism
about economic recovery and U.S. dollar weakness. [O/R]
 The Canadian dollar was the slightly favored
commodity-linked currency on Tuesday after Australia's central
bank kept interest rates on hold in a surprise move, sending
the Australian dollar down more than 1 percent against the U.S.
dollar. [ID:nRBA]
 The Canadian dollar finished the North American session at
C$1.0581, or 94.51 U.S. cents. On Monday, it closed at
C$1.0624, or 94.13 U.S. cents, appreciating for the first time
in 10 sessions.
 Earlier on Tuesday the currency rose as high as 94.65 U.S.
cents before paring gains.
 The data calendar for Canada is bare until Thursday when a
report on building permits for December and an index of
purchasing activity for January are due. ECONCA
 Ferley said the next focus for investors will be U.S. ISM
non-manufacturing index data on Wednesday and Canadian and U.S.
jobs data out on Friday, which may offer further evidence of an
economic recovery. [ID:nN01230910]
 Canadian bonds were mixed, mostly outperforming their U.S.
counterparts. The two-year bond CA2YT=RR was up 9 Canadian
cents at C$100.43 to yield 1.288 percent, while the 10-year
bond CA10YT=RR was flat at C$102.92 to yield 3.382 percent.
 A rebound in North American stocks limited the demand for
 "You've been seeing some modest moves in fixed-income
markets but the moves have been fairly muted," said Ferley.
 "Markets will likely await key releases at the end of this
week with January employment reports for Canada and the U.S. to
provide greater guidance in terms of how this recovery is
playing out and what it implies for monetary policy."
 (Reporting by Claire Sibonney; Editing by Jeffrey Hodgson)