CANADA FX DEBT-C$ strengthens on U.S. economic optimism

Thu Jan 6, 2011 8:33am EST
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 * C$ up at C$0.9934 or $1.0066
 * Bonds drift higher across curve
 By Claire Sibonney
 TORONTO, Jan 6 (Reuters) -  Canada's dollar firmed against
its U.S. counterpart on Thursday, picking up steam for a second
day as upbeat U.S. private employment data in the last session
raised the outlook for the domestic economy.
 Along with the greenback, the Canadian currency has
benefited from greater optimism for the U.S. economic
 "If North American consumer growth or economic growth is
going to be stronger, then that provides some optimism for the
export environment vis-a-vis Canada, and that's helping the
currency ... but I think it's more the case that Canada is
going to gain more traction against some of the crosses," said
Jeremy Stretch, head of currency strategy at CIBC World Markets
in London.
 Stretch said performance against the euro and Australian
dollar should be particularly interesting in the near term due
to negative structural issues in Europe and Canada's recent lag
against its Aussie commodity counterpart.
 Against the U.S. dollar, the Canadian currency CAD=D4
traded in a narrow range between C$0.9925 and C$0.9971.
 At 8:09 a.m. (1309 GMT), the currency stood at C$0.9934 to
the U.S. dollar, or $1.0066, up from Wednesday's finish at
C$0.9964 to the U.S. dollar, or $1.0036.
 Stretch said the next significant support level for the
U.S. dollar is just below the low reached on Monday at
 On the data front, domestic Ivey purchasing numbers and
U.S. weekly jobless claims may provide some direction, but
action is seen limited ahead of Friday's official employment
reports on both sides of the border.
 The jobless claims come a day after a report showing
private employers added a surprising 297,000 jobs in December,
which prompted economists to raise forecasts for the widely
followed government nonfarm payrolls numbers.
 "Certainly the labor market has been one of the elements
which has been lagging behind, and if there's real evidence
that maybe that's starting to improve as well, then that backs
up the assumptions that maybe growth is going to be a little
bit stronger in the U.S. and/or North American than previously
assumed," added Stretch.
 Canadian bond prices drifted higher, tracking U.S.
Treasuries up, with yields coming off highs reached the
previous day after the strong jobs data.
 The two-year bond CA2YT=RR rose half a Canadian cent to
yield 1.762 percent, while the 10-year bond CA10YT=RR added
16 Canadian cents to yield 3.260 percent.
  (Reporting by Claire Sibonney; editing by Jeffrey Benkoe)