CANADA FX DEBT-C$ gets lift from firm data, equity rally

Thu Jul 8, 2010 4:29pm EDT
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 * C$ ends at 95.79 U.S. cents
 * All eyes on Friday's Canadian jobs data
 * Bonds mostly lower across curve
 (Updates to close, adds quotes)
 By Jennifer Kwan
 TORONTO, July 8 (Reuters) - The Canadian dollar ended
higher against the greenback on Thursday as investors sought
riskier assets after U.S. and Australian economic data fueled
optimism about the pace of recovery.
 U.S. data on Thursday showed a sharp drop in U.S. weekly
jobless claims, easing concerns about the economic health of
Canada's largest export market, while an improvement in
Australia's employment market was also supportive.
[ID:nN08209499] [ID:nSGE66702T]
 The Canadian dollar CAD=D4 reach a session high of
C$1.0379 to the U.S. dollar, or 96.35 U.S. cents, its strongest
level since June 29.
 "The U.S. data was, for the most part, reasonably
positive," said Mark Chandler, head of Canadian fixed income
and currency strategy.
 But Chandler emphasized a key catalyst was "sentiment that
we may have been overdone in terms of risk aversion over the
last several weeks."
 The Canadian dollar finished at C$1.0440 to the U.S.
dollar, or 95.79 U.S. cents, up from Wednesday's finish at
C$1.0478 to the U.S. dollar, or 95.44 U.S. cents.
 The Canadian dollar also got a boost after the
International Monetary Fund upgraded its 2010 global growth
 As well, world stocks, another proxy of risk appetite, rose
on optimism over European bank stress tests, while North
American equities also capped the session with gains.
[MKTS/GLOB] [.N] [.TO]
 Higher oil, a key Canadian export, also supported the
currency's move higher as prices topped $75 a barrel on the
U.S. data and a drawdown in U.S. crude inventories.[O/R]
 Jack Spitz, managing director of foreign exchange at
National Bank Financial, said a key technical level now being
watched by traders is C$1.04 to the U.S. dollar.
 "A close below C$1.04 technically sets the market up for a
deeper correction down to better support at C$1.0335," he
 On the data front, the headline event is Friday's Canadian
employment report, which is expected to show 15,000 jobs were
added in the month with the unemployment rate staying steady at
8.1 percent. [ID:nN02188375] [ECI/CA]
 "The market is going to be looking for any kind of
disconnect between any double-dip sentiment in the States and
where the economics for the near term go in Canada," said
 With "risk-on," Canadian government bond prices were mostly
lower as investors flocked to assets like stocks. The short end
was largely flat ahead of the domestic jobs data, but was
building in expectations of a Bank of Canada rate hike on July
20, said RBC's Chandler.
 "You've had maybe a marginally higher probability of the
bank moving creeping into the front end," he said.
 Yields on overnight index swaps, which trade based on
expectations for the Bank of Canada's key policy rate, showed
the market sees a 61 percent chance of a July rate hike.
 The two-year government bond CA2YT=RR slipped 1 Canadian
cents to yield 1.643 percent, while the 10-year bond
CA10YT=RR was down 20 Canadian cents to yield 3.197 percent.
 Canadian bonds mostly outperformed U.S. Treasuries, with
the Canadian 2-year government bond 101 basis points above its
U.S. counterpart, down from 102 on Wednesday.
 (Editing by Jeffrey Hodgson)