RPT-CANADA FX DEBT-C$ ticks up on data, Russia, bond moves
* C$ closes at 98.93 U.S. cents
* Canadian bond prices track U.S. Treasuries down (Updates to close, adds details, quotes)
By Claire Sibonney
TORONTO, Dec 8 (Reuters) - The Canadian dollar ended slightly higher against the greenback on Wednesday on positive domestic data, comments from Russia's central bank and a deal to extend U.S. tax cuts that could benefit both currencies.
There was little direction taken from flat U.S. stocks, a key barometer of risk appetite, and lower oil and gold prices were largely shrugged off. [.N] [O/R] [GOL/]
Leading currency direction, U.S. Treasury prices plunged for a second straight day on plans to extend Bush-era U.S. tax cuts, pushing benchmark yields US10YT=RR to a six-month high. Higher yields tend to boost the greenback, enhancing the attractiveness of U.S. dollar-denominated assets.
Currency investors have focused on the better growth prospects that the tax plan may bring, which could also lift Canada, the biggest U.S. trading partner.
"Very small moves in the Canadian dollar generally, and for the most part it was trading off bond developments rather than something independent to the FX market," said Mark Chandler, head of fixed income and currency strategy at RBC Capital Markets.
The Canadian dollar CAD=D4 closed the North American session at C$1.0108 to the U.S. dollar, or 98.93 U.S. cents, up slightly from Tuesday's close at C$1.0114 to the U.S. dollar, or 98.87 U.S. cents.
Also on the plus side for Canada, Chandler pointed to the stronger than expected domestic housing starts, although he noted the details were not as upbeat as the headline suggested.
Canadian housing starts rose a greater than expected 11.6 percent in November, but most of the gains were in a single province, Ontario, and economists said the home-building industry was still decelerating toward a soft landing. [ID:nN08291860]
As well, Russia has recently started buying the Canadian dollar for its near-$500 billion in gold and forex reserves, and its central bank governor said the currency's share of the portfolio could rise to 1 to 2 percent next year. [ID:nLDE6B71GW]
For the first time in weeks, euro zone debt concerns were placed on the back burner as investors focused on U.S. economic and interest-rate fundamentals in a thinning market as the end of the year approaches.
Canadian bond prices slid on Wednesday, tracking U.S. Treasuries lower, but managing to trim earlier losses. [US/]
The two-year bond CA2YT=RR was down 8 Canadian cents to yield 1.676 percent, while the 10-year bond CA10YT=RR dropped 18 Canadian cents to yield 3.244 percent.
Canadian bonds outperformed their U.S. counterparts across the curve, and Chandler noted the Canadian-U.S. 10-year yield spread turned negative for the first time since May.
"Canada's outperformance is simply reflecting the upgrade to U.S. economic forecasts on the assumption that, first of all, the tax package is sizable and impactful and second that it's likely to go through," he said.
Also helping Canada, the auction of three-year bonds met with healthy appetite, while the U.S. auction of 10-year notes was described as relatively successful, albeit somewhat sloppy, said Chandler. [ID:nN08152103]
In other issues, the province of Ontario sold C$750 million in a reopening of an existing issue. [ID:nN07125517] (Reporting by Claire Sibonney)
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