CANADA FX DEBT-C$ recovers on US data, finishes above par again

Wed Jan 5, 2011 4:52pm EST
 
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   * C$ rises to $1.0036
 * U.S. ADP report shows better than expected job gains
 * Bond prices fall across curve
 (Updates to close)
 TORONTO, Jan 5 (Reuters) - The Canadian dollar recovered
from session lows against the greenback on Wednesday to end
above parity for a third straight session, buoyed by U.S. data
that showed a much better than expected gain in private sector
jobs for December.
 The Canadian dollar CAD=D4 finished at C$0.9964 to the
U.S. dollar, or $1.0036, up from Tuesday's close at C$0.9985 to
the U.S. dollar, or $1.0015.
 "We've managed to keep that level above parity for now.
We'll see what Friday brings. There's a lot of intrigue and
interest in both the Canadian and U.S. employment numbers. But,
for the time being, people seem to be embracing risk," said
Eric Lascelles, chief Canada macro strategist, at TD
Securities.
 "Not every risk-on currency had a banner day, but the
Canadian dollar managed to eke one out."
 It clawed back above par from a session low of C$1.0024 to
the U.S. dollar, or 99.76 U.S. cents, following an ADP Employer
Services report that showed U.S. private employers added
297,000 jobs in December, nearly triple forecasts.
[ID:nN05266445]
 "The perception is that the headwinds in the Canadian
economy are not really domestic but primarily U.S.," said Firas
Askari, head of foreign exchange trading at BMO Capital
Markets, noting that the Canadian dollar was outperforming
other major currencies.
 "This is potentially a beginning of a trend of a pickup in
employment growth, which leads to housing and everything else,
which leads to us exporting more of our great commodities.
That's the logic."
 The currency moved higher throughout the session to touch a
session high of C$0.9934 to the U.S. dollar, or $1.0066, as the
ADP figures boded well for the official U.S. jobs report on
Friday. Official monthly employment reports are also due from
Canada.
 As well, U.S. Federal Reserve Chairman Ben Bernanke's
congressional testimony on Friday will be closely followed.
[ID:nN31145126] ECON
 According to a monthly Reuters foreign exchange poll, the
currency is expected to remain fairly steady near par with the
U.S. dollar for much of this year as contradicting forces at
home and abroad push and pull.
 The survey found 76 percent of market watchers expect the
currency will stay at par or firmer over the next 12 months,
although it is forecast to end the year softer than 2010.
FXCAD [ID:nN05277637]
 BONDS SINK AS OPTIMISM RISES
 Prices for Canadian government bonds retreated after the
U.S. data, tracking U.S. Treasuries lower.
 The U.S. economic outlook improved further with the private
payrolls figures after recent strength in trade and retail
sales, prompting investors to seek riskier positions in assets
such as equities rather than the relative safety of government
bonds.
 "The strength of U.S. economic numbers has everyone feeling
very optimistic. There's a pretty powerful risk-on trade and
the bond market, in particular, is selling off," said
Lascelles.
 The two-year bond CA2YT=RR fell 8 Canadian cents to yield
1.763 percent, while the 10-year bond CA10YT=RR shed C$1.20
to yield 3.282 percent. Canadian government bonds put in a
mixed performance against their U.S. counterparts.
 (Reporting by Ka Yan Ng; editing by Rob Wilson)