CANADA FX DEBT-C$ dragged slightly lower as oil prices retreat

Wed Nov 5, 2008 9:54am EST
 
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 * Canadian dollar hits 3-week high before tilting lower
 * Lower oil prices blamed for bulk of currency's slide
 * Bonds mostly flat ahead of Friday's Canadian jobs data
 By Frank Pingue
 TORONTO, Nov 5 (Reuters) - The Canadian dollar turned lower
versus the U.S. dollar on Wednesday following a string of gains
that convinced investors to take profits as prices for oil, a
key Canadian commodity, fell.
 Bond prices were flat to slightly lower across the curve as
dealers shied away from taking major positions ahead of
Friday's key Canadian jobs data for October.
 At 9:30 a.m. (1430 GMT), the Canadian unit was at C$1.1529
to the U.S. dollar, or 86.74 U.S. cents, down from C$1.1511 to
the U.S. dollar, or 86.87 U.S. cents, at Tuesday's close.
 The dip in the Canadian currency follows a string of six
straight winning sessions versus the U.S. dollar as it recouped
a chunk of its 11.6 percent skid in October.
 Earlier on Wednesday the currency rose to C$1.1465 to the
U.S. dollar, or 87.22 U.S. cents, its highest level in just
over three weeks.
 But nagging fears of a global recession lessened investor
interest in riskier assets, which ultimately resulted in them
snapping up greenbacks.
 "The Canadian dollar is softening up a little bit and it
seems like the U.S. dollar has regained its footing, so as a
result most currencies are stumbling," said Eric Lascelles,
chief economics and rates strategist at TD Securities.
 Another drag on the currency was a slide in oil prices of
more than 2 percent to below $69 a barrel ahead of the release
of a U.S. report on crude oil inventory.
 The Canadian currency's slide was rather muted as investors
felt much of its fall in October in the midst of financial
market turmoil, was grossly overdone.
 BONDS FLAT
 Canadian bond prices were mostly lower as the October jobs
report due out at the end of the week kept most dealers huddled
on the sidelines.
 "I think there is some trepidation against being too
bullish on the bond market right now and Canada has really just
caught a lick of that and so the market right now in Canada is
really not much changed," Lascelles said.
 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.
 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 Canadian overnight Libor rate LIBOR01 was 2.4833
percent, up from 2.3550 percent on Tuesday.
 Tuesday's CORRA rate CORRA= was 2.2439 percent, down from
2.2482 percent on Monday. The Bank of Canada publishes the
previous day's rate at around 9 a.m. daily.
 The two-year bond was down 5 Canadian cents at C$101.51 to
yield 2.000 percent. The 10-year bond dropped 11 Canadian cents
to C$103.84 to yield 3.767 percent.
 The yield spread between the two- and 10-year bond was 175
basis points, down from 185 basis points at the previous
close.
 The 30-year bond was up 10 Canadian cents at C$112.50 to
yield 4.240 percent. In the United States, the 30-year treasury
yielded 4.183 percent.
 (Editing by Peter Galloway)