CANADA FX DEBT-C$ gains further after trade surplus surprise

Thu Dec 10, 2009 9:14am EST
 
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 * C$ touches high of C$1.0479 to the U.S. dollar
 * Canadian bonds prices lower, but outperform Treasuries
 (Updates to include trade data, adds quote)
 By Jennifer Kwan
 TORONTO, Dec 10 (Reuters) - The Canadian dollar extended
gains against the U.S. currency on Thursday after domestic data
showed a surprise trade surplus in October after three months
of deficits.
 The Canadian dollar touched a session high of C$1.0479, or
95.43 U.S. cents, following the trade data, up from around
C$1.0500, or 95.24 U.S. cents before the report.
 Canada unexpectedly posted a surplus as exports to the
United States picked up steam while imports fell, Statistics
Canada said on Thursday. [ID:nN10154628]
 "The Canadian dollar was already strengthening ahead of the
data as we saw risk appetite returning to the market," said
Matthew Strauss, senior currency strategist at RBC Capital
Markets.
 "Then we had the surprisingly good data. A small upside
surprise but I think more importantly it flipped from a deficit
to a surplus again and that caught the attention of the market
and we saw some further Canadian buying on the back of that."
 Also, the U.S. dollar fell against the euro and pared gains
against the yen on Thursday after a narrower-than-expected U.S.
trade deficit for October and better continuing jobless claims,
reducing safe-haven demand for the greenback. [FRX/]
[ID:nN09169993]
 At 8:53 a.m. (1353 GMT), the Canadian dollar CAD=D3 was
at C$1.0494 to the U.S. dollar, or 95.29 U.S. cents, up from
Wednesday's finish at C$1.0545 to the U.S. dollar, or 94.83
U.S. cents.
 Oil, a key Canadian export, rose to about $71 a barrel
after falling more than 2 percent in the previous session,
supported by a limp dollar and rising equities [O/R]
[MKTS/GLOB].
 "It's a risk-on day," said Steve Butler, director of
foreign exchange trading at Scotia Capital. "We probably have
been a little oversold."
 Canadian bond prices followed U.S. Treasuries lower on
supply concerns after a weak 10-year U.S. debt auction in the
previous session and as investors braced for more longer-dated
U.S. supply on Thursday.
 But Canadian government bonds outperformed U.S. issues,
with the Canadian 10-year yield 12.9 basis points below its
U.S. counterpart, compared with 11.7 basis points the previous
session.
  (Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)