CANADA FX DEBT-C$ climbs to 5-month high, US$ parity eyed

Wed Oct 6, 2010 1:07pm EDT
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 * Touches high of C$1.0063 to the US$, or 99.37 U.S. cents
 * Speculation the Fed will ease credit sends US$ swooning
 * Canadian bond prices follow U.S. Treasuries higher
 (Adds details, bond auction results, quotes)
 By Jennifer Kwan
 TORONTO, Oct 6 (Reuters) - The Canadian dollar soared to a
five-month high on Wednesday that was within striking distance
of parity with the U.S. dollar, which tumbled on belief that
the U.S. Federal Reserve will ease monetary policy further.
 The greenback extended losses after a report showed U.S.
private employers unexpectedly shed jobs in September, raising
expectations the U.S. central bank will engage in another round
of monetary policy stimulus to try to re-energize the
struggling economy.  [ID:nN06255134].
 "So long as that sentiment exists you're going to see bonds
rallying and the Canadian dollar rallying," said Eric
Lascelles, chief Canada macro strategist at TD Securities.
 "The Canadian dollar is a whisker away from parity. Parity
is very much in the sights right now."
 A Reuters poll published on Wednesday showed market
strategists expect the currency to trade in a tight range
against the U.S. dollar over the next year with the chances of
it reaching parity with the greenback roughly even. [CAD/POLL]
 The Canadian dollar CAD=D4 rose as high as C$1.0063 to
the U.S. dollar, or 99.37 U.S. cents, its highest level since
April 30. At 12:30 p.m. (1630 GMT), it was at C$1.0090 to the
U.S. dollar, or 99.11 U.S. cents, still comfortably higher than
Tuesday's finish of C$1.0173 to the U.S. dollar, or 98.30 U.S.
 The U.S. dollar sell-off lit a fire under commodity prices
with oil above $83 a barrel, while gold prices touched a record
above $1,349 an ounce. [O/R] [GOL/] For more details, see:
 Canadian government bond prices followed U.S. Treasuries
higher after data showed U.S. private employers unexpectedly
cut jobs in September. [US/]
 Also, the Bank of Canada said on Wednesday its C$3 billion
auction of 3.250 percent Government of Canada bonds due 2021
produced an average yield of 2.836 percent. [ID:nEMS10QH93]
 It was a "solid auction," said TD's Lascelles.
 "There was no evidence whatsoever that people are balking
at Canadian supply, nor could I fathom that could happen given
how strong the Canadian fiscal position is," he said.
 The low yield was 2.829 percent, while the high yield was
2.841 percent.
 The two-year bond CA2YT=RR climbed 4 Canadian cents to
yield 1.342 percent, while the 10-year bond CA10YT=RR rose 48
Canadian cents to yield 2.713 percent.
 (Editing by Peter Galloway)