CANADA FX DEBT-Canadian dollar flat, bonds higher before ISM
TORONTO, Jan 2 (Reuters) - The Canadian dollar was flat against the U.S. dollar on Friday, while bond prices edged higher, with thin volumes all around ahead of U.S. manufacturing data.
At 9:20 a.m. (1420 GMT), the Canadian dollar was at C$1.2179 to the U.S. dollar, or 82.11 U.S. cents, nearly unchanged from from Wednesday's close at C$1.2180 to the U.S. dollar, or 82.10 U.S. cents. Canadian markets were closed on Thursday for New Year's Day.
The U.S. Institute of Supply management index for December is expected to show U.S. factory activity dropped to 35.5 from 36.2 in November, according to the median forecast of economists polled by Reuters.
"We get the ISM which will be watched for a read on the manufacturing sector. But markets will likely focus on the key employment reports next week," said Paul Ferley, assistant chief economist at Royal Bank of Canada.
"Oil's down a bit. Again, markets are fairly thin. We'll probably get a firmer indication of the underlying trend in the currency when trading starts next week."
The Canadian dollar slumped nearly 19 percent in 2008, its worst annual drop versus the U.S. currency in more than half a century as plunging commodity prices in the second half of the year took their toll.
But the decline came on the heels of an unusually strong 2007 performance against the greenback and the Canadian dollar did rise against other currencies such as its commodity cousins, the New Zealand and Australian dollars.
BONDS UP, AWAIT ISM
Government bonds edged higher on Friday, resuming the general trend that emerged last year as investors around the world shunned risk amid a financial crisis and a worsening global economy.
There were no Canadian economic indicators on tap on Friday, but direction may come from the ISM index. The December statistics for employment in both Canada and the United States will be closely watched after "fairly pronounced" drops in November, Ferley said.
The two-year Canada bond rose 3 Canadian cents to C$103.13 to yield 1.085 percent, while the 10-year bond gained 10 Canadian cents to C$113.00, yielding 2.676 percent.
The yield spread between the two-year and 10-year bond was 159.1 basis points, versus 159 at the previous close.
The 30-year bond climbed 40 Canadian cents to C$128.10 to yield 3.441 percent. In the United States, the 30-year treasury yielded 2.630 percent. (Reporting by Ka Yan Ng)
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