CANADA FX DEBT-C$ recovers, approaches parity again

Wed Nov 10, 2010 8:08am EST
 
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 * C$ rises to 99.63 U.S. cents
 * Bonds follow U.S. Treasuries lower
 * CIBC sees C$ slipping from parity next year
 TORONTO, Nov 10 (Reuters) - Canada's dollar firmed against
the U.S. currency helped by a recovery in commodity prices on
Wednesday, but remained unable to sustain parity.
 At 7:50 a.m. (1250 GMT), the Canadian dollar CAD=D4 was
at C$1.0037 to the U.S. dollar, or 99.63 U.S. cents, up from
C$1.0074 to the U.S. dollar, or 99.27 U.S. cents, at Tuesday's
close.
 It neared parity with the U.S. currency, reaching as high
as C$1.0008 to the U.S. dollar, or 99.92 U.S. cents, but
bounced as choppy trading ensued with a raft of data, including
trade data for September from Canada and the U.S., to come
later in the session. ECON
 A market holiday in the U.S. on Thursday may also lighten
trade.
 "Canada is again a flow follower. It's not breaking
resistance above C$1.01. Overnight price action has been more
or less a reversal of price action seen yesterday afternoon,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.
 Market players are also monitoring developments ahead of
the Group of 20 leaders' summit on Thursday and Friday in
Seoul, and simmering tensions over economic policy between
Beijing and Washington have been front and center.
 Few investors expect any significant agreement on
currencies or trade imbalances to emerge from the meet. A G20
official told Reuters the communique would call for "flexible
exchange rate movement", and would not provide neither
numerical targets nor details on external imbalances.
[ID:nASN000037]
 "Choppy price action is indicative of some squaring (ahead
of the G20) but again, currencies like Canada that would
benefit from higher commodities and better fundamentals and
economics are likely to outperform. That's what we're seeing in
the Canadian dollar this morning," said Spitz.
 The price of oil climbed toward $87 a barrel earlier,
helping the Canadian dollar recover from a session low at
C$1.0092 to the U.S. dollar, or 99.09 U.S. cents.
 Canada's currency will likely hover around parity with the
U.S. dollar in the near term, but could weaken in early 2011 as
markets realize the U.S. Federal Reserve is not "flooding the
world with greenbacks," according to CIBC World Markets.
[ID:nN09115367]
 Canadian government bond prices were lower across the
curve, following the same path as U.S. Treasuries as investors
awaited the auction of $16 billion of 30-year bonds later on
Wednesday.
 The two-year bond CA2YT=RR dipped 4 Canadian cents to
yield 1.630 percent, while the 10-year bond CA10YT=RR fell 30
Canadian cents to yield 3.001 percent.
 (Reporting by Ka Yan Ng; Editing by Theodore d'Afflisio)