CANADA FX DEBT-C$ buoyed by commodities, extends parity run

Tue Jan 11, 2011 6:00pm EST
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   * C$ higher at C$0.9897 to U.S. dollar, or $1.0104
 * Bond prices fall across curve
 * Focus on Europe, bond auctions, BoC statement next week
 (Updates to close)
 By Solarina Ho
 TORONTO, Jan 11 (Reuters) -  The Canadian dollar
strengthened against the U.S. currency on Tuesday, as higher
commodity prices and a firmer euro increased investors' risk
appetite and helped extend the currency's run above parity with
the greenback.
 Oil, a key Canadian export, bounced back above $91 a barrel
following supply disruptions on both sides of the Atlantic.
Copper and gold also made gains, while stock markets rallied on
optimism over the upcoming corporate earnings season. [MET/L]
[GOL/] [O/R]
 "It's fairly broadly consistent with what we're seeing from
other commodity producers," said Mark Chandler, who heads RBC
Capital Markets' Canadian fixed income and currency strategy.
 The Canadian dollar CAD=D4 finished 0.35 percent higher
at C$0.9897 to the U.S. dollar, or $1.0104, up from Monday's
North American finish of C$0.9932 to the U.S. dollar, or
$1.0068, trading above parity for an eleventh straight
 The currency moved between C$0.9892 and C$0.9951 to the
U.S. dollar, or $1.0109 and $1.0049 during the session.
 "It's been a solid day ... Overall, what we're seeing is
there's some risk on sentiment. Oil is higher, equities are
higher, even the euro's higher, so that's all helped the
Canadian dollar generally," said Camilla Sutton, Chief Currency
Strategist at Scotia Capital.
 The euro climbed on speculation European officials could
raise the effective lending capacity of the region's rescue
fund and on talk of further Portuguese bond buying by the
European Central Bank. [FRX/]
 "Canada's managing to hold on to its gains from late last
year, so it's in a pretty good place ... The biggest risk to
foreign exchange markets right now is what transpires in
Europe," Sutton said.
 With riskier assets in play, Canadian bond prices fell in
tandem with U.S. Treasuries. [US/]
 The two-year bond CA2YT=RR was down 7.5 Canadian cent to
yield 1.752 percent, while the 10-year bond CA10YT=RR slid 40
Canadian cents to yield 3.226 percent.
 Currency strategists have their eyes on bond auctions this
week in Europe and North America and will also be parsing the
Bank of Canada's statement and Governor Mark Carney's tone on
Jan. 18 when the central bank next sets interest rates.
 "All eyes are very much focused on the bond market auctions
that are coming up in the next two days and how that's going to
impact not only the euro but the other currencies generally,"
said Sutton.
 In corporate issues, Canadian Imperial Bank of Commerce
(CM.TO: Quote) sold C$1 billion ($1.01 billion) of five-year notes.
 (Reporting by Solarina Ho)