January 6, 2010 / 9:45 PM / 8 years ago

CANADA FX DEBT-C$ rises as oil pierces $83 a barrel

* C$ ends up at 96.85 U.S. cents

* Bonds notch mixed performance (Updates to close, adds quote)

By Jennifer Kwan

TORONTO, Jan 6 (Reuters) - The Canadian dollar climbed against the U.S. dollar on Wednesday, boosted by a weaker greenback and by rising crude oil prices, which punched through the $83 a barrel mark.

The U.S. dollar fell against the euro after minutes from the U.S. Federal Reserve’s latest policy meeting highlighted the possibility of more stimulus measures for the economy. [FRX/]

Oil prices climbed for a 10th straight day to above $83 a barrel, boosted in part on expectations that frigid weather will boost demand for heating fuel. [O/R]

As well, ongoing Canadian dollar sentiment is helping to push the dollar/Canada towards a low of C$1.207, said Camilla Sutton, currency strategist at Scotia Capital.

“Breaking that (level) would obviously indicate new downward momentum on dollar/Canada,” she said. “I suspect we’ll see a test of that in the next couple of sessions.”

The Canadian dollar finished at C$1.0325 to the U.S. dollar, or 96.85 U.S. cents, up from C$1.0390 to the U.S. dollar, or 96.25 U.S. cents, at Tuesday’s close. Earlier on Wednesday, it shot as high as C$1.0313 to the U.S. dollar.

The Canadian dollar has been at 2-1/2-month highs this week as generally firmer equity markets at the start of the year and a steady oil price above $80 a barrel have combined to support the currency.

According to a Reuters poll of market analysts released on Wednesday, the Canadian dollar could hit parity with the U.S. currency this year, but it is likely to weaken gradually overall. [ID:nN06243414]

The currency is fairly entrenched in its current range, and likely to stay in it ahead of key U.S. and Canadian jobs data on Friday, when the market will be seeking confirmation of an economy in repair.

“I would look for any strength in the Canadian dollar before Friday’s employment release to be used as an opportunity to pare their long positions just in case we get a surprise in that number,” said John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm.

On Wednesday, the ADP Employer Services report, a precursor to the U.S. non-farm payrolls report, showed U.S. private employers shed 84,000 jobs last month, down from November, but more than expected. [ID:nN06314739]

BOND PRICES FLAT TO LOWER

Canadian bond prices were flat at the front end, but weak at the longer end.

“The reason why Canada has underperformed the U.S. at the short end is the U.S. Fed minutes were a little more dovish than expected,” said Eric Lascelles, chief economics and rates strategist, TD Securities.

At the long end, the market could be pricing in the expectation of a “happy surprise in the job numbers,” he added.

The two-year government bond CA2YT=RR ticked 1 Canadian cents lower to C$99.75 to yield 1.387 percent, while the 10-year bond CA10YT=RR shed C$1.22 to C$113.90 to yield 4.146 percent.

Canadian government bonds notched a mixed performance against U.S. issues, with the two-year yield underperforming and 38.3 basis points above its U.S. counterpart, compared with about 37 basis points on Tuesday.

The 30-year yield outperformed and was about 56 basis points below its U.S. counterpart, compared with about 54 basis points in the previous session. (Additional reporting by Jennifer Kwan; editing by Peter Galloway)

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