Canadian dollar gets boost from higher oil prices

Wed Sep 10, 2008 8:32am EDT
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 * Higher commodity prices lending support to currency
 * Stock markets likely to play factor in dollar's moves
 * Bond prices mostly flat ahead of stock market open
 By Frank Pingue
 TORONTO, Sept 10 (Reuters) - The Canadian dollar rose
slightly versus the U.S. dollar on Wednesday given a slight
rebound in commodity prices and overseas stock market losses
that were much lighter than in North America.
 Domestic bond prices, with no key domestic economic data to
influence a move, were flat and clinging to slim gains on the
short end of the curve following a quarterly loss reported by
U.S. investment bank Lehman Brothers.
 At 8:15 a.m. (1215 GMT), the Canadian unit was at C$1.0703
to the U.S. dollar, or 93.43 U.S. cents, up from C$1.0706 to
the U.S. dollar, or 93.41 U.S. cents, at Tuesday's close.
 The Canadian currency was supported by a rise in oil prices
after a meeting of the Organization of the Petroleum Exporting
Countries agreed to an unexpected production cut.
 Since Canada is a key oil exporter, its currency is often
influenced by price moves in the commodity.
 Another boost for the Canadian dollar were losses on equity
markets in Asia and Europe that were much less than the losses
on North American markets from Tuesday.
 During the overnight session the Canadian dollar recouped a
chunk of its recent losses and rallied as high as C$1.0658 to
the U.S. dollar, or 93.83 U.S. cents.
 "The strength came from two aspects, the most important
being a slight rebound in commodity prices," said Matthew
Strauss, senior currency strategist at RBC Capital Markets.
 "We also saw the stock markets in Asia and Europe not
following the U.S. markets all the way down. Although they
closed in negative territory, it's much more muted than the
losses on the U.S. equity side."
 Plenty of attention will be directed to the Toronto Stock
Exchange after it fell 487.88 points on Tuesday and has fallen
almost 20 percent from the record high reached in June.
 Canadian bond prices were a touch higher on the short end
of the curve as a lack of data left dealers to focus on the
bigger-than-expected quarterly loss by Lehman Brothers.
 Also offering some support to bond prices was the U.S.
government's bailout over the weekend of mortgage finance
companies Freddie Mac and Fannie Mae.
 "Today is an awfully slow day from an economic perspective
so I think the market is going to dwell some more on the Fannie
and Freddie developments and on Lehman," said Eric Lascelles,
chief economics and rates strategist at TD Securities.
 The two-year bond rose 1 Canadian cent to C$100.10 to yield
2.703 percent, while the 10-year was off 5 Canadian cents at
C$106.50 to yield 3.455 percent.
 The yield spread between the two-year and 10-year bond was
76.8 basis points, unchanged from the previous close.
 The 30-year bond was off 5 Canadian cents at C$118.20 for a
yield of 3.936 percent. In the United States, the 30-year
Treasury yielded 4.187 percent.
 The three-month when-issued T-bill yielded 2.40 percent,
down from 2.42 percent at the previous close.
 (Editing by Scott Anderson)