CANADA FX DEBT-C$ lifted by surprise Canada trade surplus

Fri Feb 11, 2011 9:36am EST
 
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 * C$ firms to C$0.9929 vs US$, or $1.0072
 * Bond prices rally with US Treasuries
 * Canada reports trade surplus of C$3 billion
 (Updates after Canada, US trade data)
 By Claire Sibonney
 TORONTO, Feb 11 (Reuters) - The Canadian dollar climbed to
a session high against its U.S. counterpart on Friday after
monthly trade data dramatically beat expectations as the
country returned to a trade surplus.
 Soaring exports of crude oil and other energy products
unexpectedly tipped Canada's trade balance into the black in
December -- to C$3 billion -- after nine months of deficits,
fueling hopes the much-coveted export recovery is gaining
traction. For more see [ID:nN11157853].
 Economists in a Reuters survey had predicted the country's
trade deficit to widen to C$350 million.
 The Canadian currency CAD=D4 firmed as high as C$0.9929
to the U.S. dollar, or $1.0072, up from around C$0.9958 to the
U.S. dollar, or $1.0042 immediately before the release.
 "The Canadian dollar certainly got a good lift from the
Canadian trade report ... A 10 percent jump in exports in a
month will do that," said Sal Guatieri, senior economist at BMO
Capital Markets.
 "It suggests our economy is benefiting tremendously from
the commodities boom, not just because of rising resource
prices but because of strong global demand for resources."
 Guatieri said the surprise figure may prompt the Bank of
Canada to resume hiking interest rates sooner rather than
later. [CA/POLL]
 "It's quite possible that the economy is growing a little
faster than the Bank of Canada anticipated and  as a result,
there is a risk it could resume raising interest rates before
the summer," he said.
 At 9:15 a.m. (1415 GMT), the Canadian dollar CAD=D4 was
at C$0.9948 to the U.S. dollar, or $1.0052, up from Thursday's
North American session at C$0.9958 to the U.S. dollar, or
$1.0042.
 Prior to the data, the currency was nearly perfectly flat
compared to Thursday's close, against a risk-off backdrop
partly on growing tensions in Egypt after President Hosni
Mubarak disappointed protesters hoping he would resign.
 Helping to support the Canadian dollar however, were higher
oil prices resulting from supply concerns in the Mideast, as
well as broad strength of the greenback, which can tend to rub
off on other North American currencies. [O/R] [FRX/]
 Michael O'Neill, managing director at Knightsbridge Foreign
Exchange, said the currency was still consolidating in a
C$0.9830 to C$1.0010 range.
 Despite the healthy domestic data, Canadian government bond
prices also rallied, tracking U.S. Treasuries, as geopolitical
fears in Egypt and a wider trade deficit in the United States
 attracted some flows into safe-haven assets. [US/]
 The two-year Canadian government bond CA2YT=RR rose 6
Canadian cents to yield 1.849 percent, while the 10-year bond
CA10YT=RR advanced 27 Canadian cents to yield 3.434 percent.
 (Additional reporting by Ka Yan Ng; Editing by James
Dalgleish)