July 3, 2009 / 8:50 PM / in 8 years

CANADA FX DEBT-C$ down for third straight week, bonds up

* C$ ends nearly unchanged at 86.08 U.S. cents

* C$ down 0.6 on the week, third week of decline

* Bonds extend gains from previous session’s US jobs data

* Focus next week on Canada jobs report

By Ka Yan Ng

TORONTO, July 3 (Reuters) - The Canadian dollar nudged higher against the greenback on Friday in thin trading with U.S. markets closed for the Independence Day holiday, but it was lower on the week, its third straight week of declines.

The Canadian dollar closed at C$1.1617 to the U.S. dollar, or 86.08 U.S. cents, up from Thursday’s finish of C$1.1623 to the U.S. dollar, or 86.04 U.S. cents. On the week it dropped 0.6 percent.

“It’s the Independence Day holiday that has created the illiquidity that one would expect. The market is just floating,” said Jack Spitz, managing director of foreign exchange at National Bank Financial.

The Canadian dollar’s small gain on Friday came despite a drop in oil prices CLc1 below $66 a barrel. Oil is a key Canadian export and its direction often influences the direction of the commodity-linked currency.

There was no Canadian economic data on Friday and market players were left to consider next week’s events, including the Group of Eight industrialized nations meetings July 8-10, at which currency diversification plans could be discussed.

Canadian Finance Minister Jim Flaherty said on Friday that use of the U.S. dollar as the global reserve currency has been a stabilizing force during the current financial crisis, adding his weight, at least for now, to Japan’s opposition to a Chinese push for a new super-sovereign reserve currency that would displace the U.S. dollar. [ID:nL3591266] [ID:nN03137175]

Flaherty, speaking via teleconference from Chile, also told reporters on Friday the jobless rates in Canada and the United States will continue to rise.

His comments come on the heels of a gloomy U.S. jobs report for June on Thursday that dimmed optimism about the pace of economic recovery and dulled investor appetite for risk. Canada’s employment figures for June are due for release next Friday, and they will give the market a new snapshot of how the economy is faring.

Housing starts data for June, manufacturing sales data for May and the trade balance for May are also due next week.

BONDS EXTEND SAFE HAVEN GAINS

Canadian bond prices were mostly higher on Friday, largely due to the lingering effects of Thursday’s move higher following the U.S. June jobs report.

The benchmark two-year government bond rose 6 Canadian cents to C$100.14 to yield 1.175 percent, while the 10-year bond was up 14 Canadian cents at C$103.34 to yield 3.350 percent.

The 30-year bond gained 25 Canadian cents to C$119.60 to yield 3.848 percent. (Reporting by Ka Yan Ng; editing by Peter Galloway)

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