CANADA FX DEBT-C$ hits parity. helped by U.S. data, commodities

Wed Nov 10, 2010 10:25am EST
 
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   * C$ pushes through parity, hits $1.0006
 * Bonds gain ahead of U.S., Canada auctions
 * CIBC sees C$ slipping from parity next year
 (Updates with details, commentary)
 By Claire Sibonney
 TORONTO, Nov 10 (Reuters) - The Canadian dollar briefly
rose above parity with its U.S. counterpart on Wednesday,
helped by stronger-than-expected U.S. data and firm commodity
prices.
 The currency reversed earlier weakness briefly seen after
Canada posted an unexpectedly large trade deficit.
[ID:nN10169238]
 The Canadian dollar CAD=D4 hit a session high of 99.94
Canadian cents to the U.S. dollar, or $1.0006, up from around
C$1.0050 to the U.S. dollar, or 99.50 U.S. cents.
 "We're seeing overall U.S. dollar weakness across the
board," said Darren Richardson, senior corporate dealer at
CanadianForex.
 "Combine that with the stronger commodity prices this
morning, that's been the main driver behind the Canadian dollar
force."
 Gold rose to hold around $1,400, recovering from its
choppiest trading session in six months the day before, as
concerns about euro zone debt reignited safe-haven buying,
while oil prices had bounced over $87 a barrel. [GOL/] [O/R]
 Data showed initial claims for U.S. jobless benefits hit a
four-month low last week, while the trade gap narrowed more
than expected in September. The encouraging data helped
supported riskier assets.
 "It helped traders continue to add risk and give them the
confidence to buy Canadian," added Richardson.
 He cautioned however, that further Canadian dollar strength
in the session is unlikely with significant support for the
greenback at 99.77 Canadian cents to the U.S. dollar, and
strong demand by corporate Canada to buy the U.S. currency at
its current low levels.
 By 10:00 a.m. (1500 GMT), the Canadian dollar CAD=D4
eased to C$1.0028 to the U.S. dollar, or 99.72 U.S. cents,
still up from C$1.0074 to the U.S. dollar, or 99.27 U.S. cents,
at Tuesday's close.
 Canada's Remembrance Day and U.S. Veterans Day holidays,
which will close bond markets, may also lighten trade.
 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]
 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 a report from CIBC World
Markets. [ID:nN09115367]
 Canadian government bond prices were higher across the
curve as investors awaited the auction of C$3 billion of 2-year
Government of Canada bonds and $16 billion of 30-year U.S.
Treasuries later on Wednesday.
 The two-year bond CA2YT=RR was up 8 Canadian cents to
yield 1.570 percent, while the 10-year bond CA10YT=RR gained
13 Canadian cents to yield 2.961 percent.
 (Additional reporting by Ka Yan Ng; editing by Jeffrey
Hodgson)