CANADA FX DEBT-C$ nears two-week high as commodities rally

Tue Oct 6, 2009 7:53am EDT
 
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 * C$ hits highest level since Sept. 17
 * Higher commodity backdrop helps rally
 * Bonds a touch lower across curve
 By Frank Pingue
 TORONTO, Oct 6 (Reuters) - The Canadian dollar rose to its
highest level versus the U.S. currency in nearly two weeks on
Tuesday morning given the backdrop of higher prices for key
domestic exports like oil and gold.
 A media report, later denied, that Gulf Arab states were in
talks to abandon the U.S. dollar in oil trade, weighed on the
greenback and gave a boost to oil and gold. [ID:nSYD421795]
 Oil prices rose more than $1 to above $71 after the report,
while the price of gold hit an 18-month high. [O/L] [GOL/] The
Canadian dollar's moves are often influenced by prices for the
two commodities.
 That helped the Canadian currency rise to C$1.0631 to the
U.S. dollar, or 94.06 U.S. cents, its highest level since Sept.
17. It backed off slightly but managed to hold well above the
previous session's close.
 By 7:35 a.m. (1135 GMT), the Canadian unit was at C$1.0635
to the U.S. dollar, or 94.03 U.S. cents, up from C$1.0701 to
the U.S. dollar, or 93.45 U.S. cents, at Monday's close.
 "Really it's another run (lower) on the U.S. dollar and
that sent commodities higher and that sent the Canadian dollar
up a little bit," said Steve Butler, director of foreign
exchange trading at Scotia Capital.
 "It would be nice to get a close below C$1.0650 because
that will keep momentum going a little bit and signal that we
are ready for some more Canadian dollar strength."
 The Canadian dollar's performance will likely continue to
be driven by events outside of Canada until later in the week
when domestic housing starts data is released on Thursday. The
key report for the week, however, is Friday's release of
September jobs data.
 Canadian bond prices were a touch lower across the curve,
taking their cue from the bigger U.S. Treasury market ahead of
a sale of $3 billion in U.S. 3-year bonds. [US/O]
 (Editing by Chizu Nomiyama)