CANADA FX DEBT-C$ tips higher, bond fall as risk sentiment up

Thu Sep 2, 2010 8:25am EDT
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   * C$ rises to 95.24 U.S. cents
 * Bonds slip as risk appetite on
 TORONTO, Sept 2 (Reuters) - Canada's dollar edged higher
against the U.S. currency on Thursday, while bond prices
slipped, as risk appetite was held over from the previous
 North American stock markets looked set to rise, extending
gains made on Wednesday on upbeat manufacturing surveys from
the United States and China, although European markets were a
touch weaker.
 Thursday's slate of U.S. data was not expected to provide
too much volatility ahead of Friday's critical U.S. nonfarm
payrolls report for August.
 On tap were July data for factory orders, which are
expected to rise 0.3 percent after a decline of 1.2 percent in
June, and pending home sales, seen falling 1 percent after
dropping 2.6 percent the previous month. ECON
 "Looking at the data news there's not a lot that I think
can really push the market one way or another. I'm tempted to
think that the softer tone from overseas could easily carry
over into today's market but nothing too sharp of a decline," 
said David Tulk, senior macro strategist at TD Securities.
 "I see a fair bit of positioning ahead of that (U.S.
nonfarm payrolls) release and if anything, it's a bit of a
consolidation of yesterday's gains."
 At 8:10 a.m. (1210 GMT), the Canadian dollar CAD=D4  was
at C$1.0500 to the U.S. dollar, or 95.24 U.S. cents, up from
C$1.0520 to the U.S. dollar, or 95.06 U.S. cents, at
Wednesday's close. It had jumped more than a penny the previous
session as risk appetite rose on strong economic data that
soothed investor fears about the lagging recovery.
 Canada's two-year bond CA2YT=RR dipped 3 Canadian cents
to yield 1.282 percent, while the 10-year issue CA10YT=RR
dropped 24 Canadian cents to yield 2.875 percent.
 Domestic economic reports were finished earlier in the week
with a below-forecast reading on second-quarter economic
growth, leaving market players to consider how external data,
such as Friday's U.S. jobs report, will influence the Bank of
Canada heading into next week's rate decision. [ID:nN31235915]
 The sputtering U.S. economy has displaced European debt
problems as the top worry for Canadian policymakers, but even
as gloom settles over the U.S. Federal Reserve, the Bank of
Canada looks set to raise rates for a third time this year.
 The Bank of Canada's Sept. 8 rate decision is one of the
closest calls in some time, with market pricing, as measured by
a Reuters calculation of yields on overnight index swaps, were
roughly split on whether the central bank would lift rates.
 Most of Canada's primary securities dealers, surveyed by
Reuters on Tuesday, still forecast the central bank will raise
its key rate by a quarter point to 1.0 percent, and then stand
pat for the rest of the year because of the slowing economy.
 Canadian assets were little changed by the European Central
Bank's decision to keep interest rates on hold at a record low,
as expected, amid a lopsided economic recovery and continued
worries about the banking sector. [ID:nFRK015200]
 Traders will be watching to see whether ECB President
Jean-Claude Trichet, who is due to hold a news conference at
1230 GMT, makes a formal decision to extend liquidity to help
the banking system as well as new economic forecasts. [FRX/]
 (Reporting by Ka Yan Ng; Editing by Chizu Nomiyama)