CANADA FX DEBT-C$ makes fresh 2-week high, eye on parity

Tue Nov 2, 2010 8:56am EDT
 
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 * C$ rises to 99.20 U.S cents
 * Investors eye central banks, U.S. elections, data
 * Ottawa to rule on BHP's bid for Potash Corp this week
 By Ka Yan Ng
 TORONTO, Nov 2 (Reuters) - Canada's dollar hit its highest
in more than two weeks against the U.S. currency on Tuesday,
putting its sights on parity again, helped by an unexpected
interest rate rise in Australia.
 But the gains paled in comparison to its commodity cousin,
the Australian dollar, which shot above parity to its highest
against the U.S. currency since 1983 after a surprise
Australian interest rate hike. [FRX/] [ID:nSGE6A106T]
 At 8:30 a.m. (1230 GMT), the Canadian dollar was at its
highest since Oct. 15 at C$1.0081 to the U.S. dollar, or 99.20
U.S. cents, up from C$1.0161 to the U.S. dollar, or 98.42 U.S
cents, at Monday's close.
 Canada's currency pushed above parity last month but had no
staying power, partly because the Bank of Canada's last policy
statement was more dovish than some had expected.
 "We're just a penny shy of parity once again. What's going
to push us over? There's no shortage of event risks and
developments over the next few days that could," said Eric
Lascelles, chief Canada macro strategist, at TD Securities.
 This week's events pose strong potential for market swings
as investors will absorb policy decisions from a host of
central banks, particularly the U.S. Federal Reserve, which is
expected to launch another round of quantitative easing through
bond purchases. U.S. midterm elections on Tuesday and U.S. and
Canadian monthly jobs data, due Friday, are also key.
 In addition, investors will also be keeping an eye on
developments in Anglo-Australian miner BHP Billiton's $39
billion hostile bid to buy Potash Corp., a fertilizer giant and
one of Canada's biggest companies. A successful deal could
nudge the Canadian dollar higher as many Canadian shareholders
convert their U.S. dollar payouts back to the domestic
currency. [ID:nLDE6A00HD]
 Lascelles said parity was a "magical" figure but that TD
was not expecting it right away and one key factor may be the
details of the Fed's quantitative easing program.
 Markets are generally priced for the U.S. central bank to
commit to buying at least $500 billion in Treasury debt over
the coming months in a new round of stimulus aimed at shoring
up the U.S. economy. [ID:nNLLRLE6LL]
 "We're formally forecasting at least as an opening position
more like $300 billion over the first few months. I'm inclined
to think that the market could be a little bit disappointed
tomorrow with the consequence that the U.S. dollar strengthens
and the Canadian dollar doesn't quite pull off parity. It
should be a whippy market," said Lascelles.
 Canadian government bonds were slightly lower, taking a
wait-and-see approach similar to U.S. Treasuries as the two-day
Fed meeting was to start on Tuesday.
 The two-year bond CA2YT=RR fell 4 Canadian cents to yield
1.431 percent, while the 10-year bond CA0YT=RR shed 10
Canadian cents to yield 2.851 percent.
 (Reporting by Ka Yan Ng; Editing by Theodore d'Afflisio)