CANADA FX DEBT-C$ edges higher as commodity prices rebound

Mon May 9, 2011 4:27pm EDT
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   * C$ ends up at C$0.9636 vs US$, or $1.0378
 * Bond prices firm across curve
 (Updates to close, adds details, commentary)
 By Claire Sibonney
 TORONTO, May 9 (Reuters) - The commodity-driven Canadian
dollar pushed higher against the greenback on Monday, as a
rebound in energy and metal prices trumped worries about
European sovereign debt.
 U.S. crude oil futures rebounded from last week's massive
losses to end above $102 a barrel, as droves of bargain-hunters
entered the market. [O/R]
 "Since we've had a relatively nasty four-day slide, the
fact that it's just stopped is certainly suggesting that the
global economic backdrop is not as worrisome now as it was
three days ago when oil seemed to be dropping a big figure
every couple of hours," said David Watt, senior currency
strategist at RBC Capital Markets.
 "The general backdrop overall is more supportive of the
global economic recovery than it was last week when it seemed
like fear was the dominant theme."
 Precious metal prices joined in the advance, as gold gained
1 percent and silver surged 5 percent. [GOL/]
 Weighing on sentiment however, the euro hovered near a
three-week low against the U.S. dollar, after Standard and
Poor's cut Greece's credit rating to B from BB- on concerns
that a debt restructuring is increasingly likely. [FRX/]
 "It's still undecided in terms of where to take currency
valuations, given last Thursday and Friday's massive short
squeeze in the euro," said Jack Spitz, managing director of
foreign exchange at National Bank Financial, noting the
disconnect between rising commodity prices and falling European
equity markets earlier in the day.
 "The U.S. dollar itself is prime for a continued short
squeeze so we could be seeing more U.S. dollar gains which
could ultimately reflect itself in more bids in dollar/Canada
as well."
 The Canadian dollar CAD=D4 ended the North American
session at C$0.9636 to the U.S. dollar, or $1.0378, up from
Friday's close at C$0.9670 to the U.S. dollar, or $1.0341.
 With no major data on Monday, investors will be looking for
further catalysts to set the tone for the rest of the week.
 Near term, Watt said resistance for the Canadian dollar was
around C$0.9560, and support at C$0.9720.
 A slew of upcoming economic data from China, European
inflation figures and North American trade figures are expected
to provide further direction this week.
 Canadian bond prices picked up across the curve.
 They outperformed their U.S. counterparts slightly on the
long end, as investors turned away from Treasuries in favor of
commodities and stocks ahead of the sale of $72 billion of U.S.
government debts this week. [US/]
 The two-year Canadian government bond CA2YT=RR was up
half a Canadian cent to yield 1.661 percent, while the 10-year
bond CA2YT=RR rallied 15 Canadian cents to yield 3.178
 (Reporting by Claire Sibonney; editing by Rob Wilson)