RPT-CANADA FX DEBT-C$ extends rise to sixth straight session

Tue Nov 4, 2008 4:40pm EST
 
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 (Repeats to broaden distribution)
 * Canadian dollar hits three-week high above 87 U.S. cents
 * Appetite for risk helps fuel currency's latest charge
 * Bond prices end higher on attractive valuations
 By Frank Pingue
 TORONTO, Nov 4 (Reuters) - The red-hot Canadian dollar
closed higher against the greenback on Tuesday for a sixth
straight session, thanks to a combination of lofty commodity
prices and expectations that interest-rate cuts will help
stimulate global growth.
 Domestic bond prices rebounded to finish higher across the
curve as improved market sentiment over the past week sent
prices to levels that dealers felt were too good to pass up.
 The Canadian dollar closed at C$1.1511 to the U.S. dollar,
or 86.87 U.S. cents, up 2.6 percent from C$1.1809 to the U.S.
dollar, or 84.68 U.S. cents, on Monday.
 During the session the currency hit a high of C$1.1480 to
the U.S. dollar, or 87.11 U.S. cents, which was up more than 10
cents from the four-year low it dropped to early last week.
 The sudden climb by the Canadian dollar, which comes on the
heels of its 11.6 percent skid in October, is credited to a
slew of factors that include higher prices for key commodities
like oil and metals, an improved overall market sentiment and a
general sense that the currency was oversold last month.
 "In this environment of increasing risk appetite it came as
no surprise that the commodity-based currencies performed very
well, including the Canadian dollar," said Matthew Strauss,
senior currency strategist at RBC Capital Markets.
 "Clearly now that we are seeing things stabilize both in
the equity and commodity front, the Canadian dollar is finding
some stability just above C$1.15 (to the U.S. dollar)."
 The turmoil in financial markets during October was due
largely to concerns about a global recession, but indications
that central banks are ready to move to limit weakening in
economic activity have helped to ease worries.
 There was talk in markets that the European Central Bank
and the Bank of England would cut interest rates on Thursday.
 Central banks including the People's Bank of China and U.S.
Federal Reserve, have recently lowered their key interest rates
in a push to stimulate economies and help cope with the
slowdown.
 BONDS PRICE END HIGHER
 Canadian bond prices all ended higher as a recent shift
from government debt to riskier assets like stocks left bonds
at prices that dealers considered to be attractive.
 But the gains were limited as dealers avoided taking huge
positions until seeing the results of the U.S. presidential
election.
 "There's been a reassessment that maybe there is some value
even at current levels, particularly if the Fed is going to
bring down rates and central banks are not only going to keep
rates lower but keep them low for a long time," said Michael
Gregory, senior economist at BMO Capital Markets.
 Dealers were also awaiting the next batch of domestic data.
September's building permits and the Ivey Purchasing Managers
Index for October are both set to be released on Thursday.
 The key report of the week comes on Friday when the October
jobs data is released. After an unexpected surge of 106,900 new
jobs in September, analysts surveyed by Reuters expect a
decline of 10,000 in October, and for the unemployment rate to
rise to 6.2 percent from 6.1 percent.
 The two-year bond rose 7 Canadian cents to C$101.57 to
yield 1.971 percent. The 10-year bond climbed 41 Canadian cents
to C$103.96 to yield 3.753 percent.
 The yield spread between the two- and 10-year bond was 185
basis points, up from 173 basis points at the previous close.
 The 30-year bond increased 75 Canadian cents to C$112.30 to
yield 4.252 percent. In the United States, the 30-year treasury
yielded 4.204 percent.