CANADA FX DEBT-C$ highest since May 18 on recovery prospects

Thu Jun 10, 2010 9:03am EDT
 
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 * C$ rises to 96.62 U.S. cents
 * Strong Aussie data plus New Zealand rate hike help mood
 * Bond prices sag as safe-haven bid cools
 By John McCrank
 TORONTO, June 10 (Reuters) - Canada's dollar rose to its
highest point in over three weeks against the greenback on
Thursday after a stellar report for Chinese exports in May,
increasing hopes for the global economic recovery and giving a
bid to commodity prices.
 Chinese exports surged in May by 48.5 percent over a year
earlier, well above forecasts for a 32 percent gain, confirming
a Reuters report from Wednesday. [ID:nTOE65901X]
 "On the back of that, we saw commodity prices rise with oil
up toward $75," said Matthew Strauss, senior currency
strategist at RBC Capital Markets. [ID:nSGE659083]
 Canada is a major exporter of commodities and is the
biggest oil supplier to the United States.
 "So the Canadian dollar is benefiting from that as well as
the general move out of the U.S. dollar," said Strauss.
 He added that the Canadian dollar was outperforming the yen
and the greenback, both of which are often seen as safe-haven
currencies, where investors seek refuge when the economic mood
sours.
 At 8:40 a.m. the Canadian dollar was at C$1.0350 to the
U.S. dollar, or 96.62 U.S. cents, up from Wednesday's North
American finish of C$1.0443 to the U.S. dollar, or 95.76 U.S.
cents. It was the currency's strongest level since May 18.
 The currency was trading one-for-one with the greenback
through much of April as the global economy appeared to be on
the mend and on the back of Canada's strong economic
fundamentals -- seen to be the strongest in the G8.
 But the sovereign debt situation in Europe put a healthy
dose of fear back into the markets, giving a bid to the U.S.
dollar and sending commodity prices lower.
 As a result, Canada's dollar hit a low of C$1.0851, or
92.16 U.S. cents, on May 25, but has been slowly been gaining
ground as the concerns out of Europe eased and the global
recovery was seen gaining momentum.
 On Thursday, a robust employment report out of Australia
helped cheer market sentiment, as did a move by New Zealand's
central bank to lift interest rates from a record low, its
first hike since the global economic crisis. [ID:nSGE6580KR]
[ID:nSGE65904N]
 The return to risk appetite was evident in U.S. stock
futures, which pointed to gains on Wall Street [ID:nN10203396]
 There is no major Canadian data on tap.
 Bank of Canada Governor Mark Carney gave a speech in
Montreal on Thursday urging the G20 to push ahead quickly with
"radical" financial reforms but signaled flexibility on when
new global banking rules would be phased in. [ID:nN10199122]
[nN10517170]
 Canada will host a meeting of G20 leaders on June 26-27 in
Toronto.
 CANADIAN BOND PRICES DIP
 Canadian bond prices edged lower across the curve, as risk
appetite rose, cooling bids from investors seeking the safety
of government debt.
 The two-year government bond CA2YT=RR fell 8 Canadian
cents to yield 1.759 percent, while the 10-year bond
CA10YT=RR fell 22 Canadian cents to yield 3.381 percent.
 (Editing by Chizu Nomiyama)