CANADA FX DEBT-C$ touches highest since Nov, helped by oil rally

Mon May 4, 2009 4:32pm EDT
 
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 * C$ finishes at 85.22 U.S. cents
 * Unit hit highest level in nearly 6 months
 * Oil settles at highest level since late Nov
 * Bond prices weaker across curve
 (Adds details, quotes)
 By Jennifer Kwan
 TORONTO, May 4 (Reuters) - The Canadian dollar shot to its
highest level in nearly six months on Monday, boosted by a jump
in equity markets and oil prices as hopes increased that the
global economy may be on the road to stabilizing.
 The Canadian dollar rallied as high as C$1.1725 to the U.S.
dollar, or 85.29 U.S. cents, its highest level since Nov. 10,
as crude, a key Canadian export, also pushed above $54 a
barrel, its highest settlement of the year. [ID:nSP468176]
 "Slowly but surely things are looking better and better and
I think there's a little bit of hope in the market that maybe
the second half of 2009 is not going to be as bad as everybody
feared," said Steve Butler, director of foreign exchange
trading at Scotia Capital.
 "As long as equities keep climbing the market feels safer
and safer every day."
 The Canadian dollar finished at C$1.1735 to the U.S.
dollar, or 85.22 U.S. cents, up from C$1.1859 to the U.S.
dollar, or 84.32 U.S. cents, at Friday's close.
 The currency traded in tandem with equity and commodity
markets, in line with a recent theme of risk appetite that has
seen investors willing to buy riskier assets on the hope that
the global economy is getting healthier.
 The Toronto Stock Exchange's S&P/TSX composite index
.GSPTSE rose more than 3 percent on Monday as resource-issues
were lifted by commodity prices. Financials gained on hope that
stress tests on the biggest U.S. banks will provide some clues
on the depth of the problems in the U.S. financials sector.
 Global equities rallied on bank hopes and global data that
showed improvement in manufacturing in Europe, China and India,
and on positive signs on U.S. home sales and construction.
[ID:nL4731565]
 The Canadian currency benefited as the U.S. dollar weakened
on a reversal of safe-haven buying, said Eric Lascelles, chief
economics and rates strategist TD Securities.
 "It's the safe haven story. The irony is that the better
the U.S. economy looks the worse its currency does," he said.
 With no major Canadian economic data was due on Monday,
markets will be watching for employment data, the Ivey
Purchasing Managers' Index, and housing reports later this
week.
 BONDS MOSTLY LOWER
 Canadian bonds were mostly weaker across the curve as money
flowed to equity markets on growing risk appetite, denting the
appeal of government debt.
 "To some extent, I would say it's the same story," said
Lascelles. However, he added this will be a "very heavy supply
week" in both Canada and the U.S.
 "That's always going to weigh on the bond market to some
extent," Lascelles said.
 The two-year Canada bond fell 7 Canadian cents to C$100.47
to yield 1.020 percent, while the 10-year ticked 3 Canadian
cents higher to C$105.58 to yield 3.101 percent.
 The 30-year bond fell 40 Canadian cents to yield 3.865
percent. In the United States, the 30-year Treasury yielded
4.0635 percent.
 Canadian bonds outperformed their U.S. counterparts across
much of the curve. The 10-year bond yield was 5.6 basis points
below the U.S. 10-year yield, compared with 5.3 basis points
below on Friday.
 (Editing by Jeffrey Hodgson)