CANADA FX DEBT-Rising commodities help give C$ a boost

Thu Jun 9, 2011 4:51pm EDT
 
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   * C$ closes at C$0.9731 to the U.S. dollar, or $1.0276
 * Bond prices fall as investors seek riskier assets
 By John McCrank
 TORONTO, June 9 (Reuters) - Canada's dollar strengthened on
Thursday as oil prices firmed and investors waded back into
riskier assets, helping boost the currency ahead of Friday's
key employment report for May.
 U.S. crude climbed over 1 percent on supply worries after
OPEC ministers failed on Wednesday to agree on output
targets.[O/R]
 Other commodities also gained. The benchmark Thomson
Reuters-Jefferies CRB index .CRB, which tracks a basket of 19
commodities, rose 0.72 percent to its highest level since May 5
as risk appetite improved, which also sent equity markets
higher.
 Canada's economy is heavily reliant on resource exports and
its currency is sensitive to swings in their prices.
 "On days where we get risk appetite, the Canadian dollar
tends to do OK, and we get an extra fill-up if commodity prices
are reasonably firm," said Mark Chandler, head of Canadian
fixed income and currency strategy, at RBC Capital Markets.
 The Canadian dollar CAD=D4 ended the North American
session at C$0.9731 to the U.S. dollar, or $1.0276, up from
Wednesday's close of C$0.9797 to the U.S. dollar, or $1.0207.
 The currency briefly weakened after Canadian data showed
the country's trade deficit had widened unexpectedly in April,
largely due to supply chain disruptions after the Japanese
earthquake and tsunami in March. [ID:nN09150409]
 "We had relatively bad trade numbers, but a lot of it is
coming from revision from previous month, which was already
hinted in last week's GDP," said Charles St-Arnaud, Canadian
economist and currency strategist in New York at Nomura
Securities International.
 He noted that the currency bounced back after the market
assessed the data was not as negative as it first appeared.
 Friday's data -- Canadian jobs figures for May -- has the
potential to have a bigger impact on the currency as investors
look for clues as to when the Bank of Canada might next raise
interest rates. [ID:nN03165332]
 Economist polled by Reuters forecast 20,000 jobs were
created in the month. ECONCA
 Market players have been pushing out their expectations for
when the Bank of Canada will resume raising interest rates as
North American economic data has generally disappointed,
preventing the currency from making gains. [CA/POLL]
 Higher interest rates tend to boost currencies by
attracting investors to short-term deposits. The central bank
increased its key policy rate three times last year, stopping
in September at 1 percent.
 In the United States, softening economic growth has pushed
the Federal Reserve to the sidelines.
 Anything that could breathe some life back into the story
of the Bank of Canada raising interest rates independently and
fairly early relative to the Fed has the potential to boost the
currency, RBC's Chandler said.
 South of the border, U.S. jobless claims rose unexpectedly,
stoking fears of a stalled economic recovery. But a separate
report showed record U.S. exports in April. The United States
is Canada's biggest trading partner. [ID:nN09117731]
 Canadian bond prices fell across the curve, shadowing U.S.
Treasuries, as rising equity markets lessened the allure of
safe-haven government debt. [US/]
 Stocks in Toronto rose after seven days of declines, while
Wall Street saw gains after six-straight drops. [.TO]
 The two-year bond CA2YT=RR was down 3 Canadian cents to
yield 1.445 percent, while the 10-year bond CA10YT=RR shed 31
Canadian cents to yield 3.042 percent.
 (Additional reporting by Solarina Ho; Editing by Jeffrey
Hodgson)