CANADA FX DEBT-C$ extends gains on BoC expectations

Mon Jul 12, 2010 8:20am EDT
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 * C$ rises to 96.87 U.S. cents
 * Bond prices rise across curve
 By Claire Sibonney
 TORONTO, July 12 (Reuters) - The Canadian dollar extended
gains against the greenback on Monday on heightened
expectations that the Bank of Canada will raise interest rates
again this month following last week's standout employment
 Data on Friday showed Canada's economy created six times
more jobs than forecast in June, contradicting other recent
data suggesting the country's galloping economic recovery was
slowing. [ID:nN09261751]
 "Really it's just a matter of CAD still benefiting on
stronger than expected employment," said Camilla Sutton, senior
currency strategist at Scotia  Capital.
 "The market is just excited about potential for the Bank of
Canada to hike rates July 20."
 In a Reuters poll conducted after the jobs report all of
Canada's primary securities dealers predicted that the Bank of
Canada would raise interest rates by 25 basis points this month
and again in September. But some forecast a pause later this
year on uncertainty about the pace of global economic growth.
 Sutton said the Canadian dollar was outperforming all the
other G10 currencies, and that traders will also be watching
the Bank of Canada's Business Outlook Survey and the Senior
Loan Officer Survey at 10:30 a.m. (1430 GMT) for more anecdotal
clues about the economy.
 Market participants also awaited second-quarter earnings
results from U.S. firms, which kick-off with Alcoa later on
Monday. A weak run of economic data has raised speculation the
economic recovery may be losing momentum and stung the U.S.
 At 7:55 a.m. (1155 GMT), the Canadian dollar CAD=D4 was
at C$1.0323 to the U.S. dollar, or 96.87 U.S. cents, up from
Friday's finish at C$1.0337 to the U.S. dollar, or 96.74 U.S.
 Sutton said a key level for currency was the 100-day moving
average at C$1.0302. "I think dollar/Canada is really in this
broader range so if we break through that C$1.03 level that
opens up a test down to C$1.0180."
 Canadian bond prices advanced, tracking U.S. Treasuries and
German Bunds higher, driven by stop-loss buying and as weaker
U.S. futures prompted bids for safe-haven government debt.
 The two-year government bond CA2YT=RR added 1 Canadian
cent to yield 1.714 percent, while the 10-year bond CA10YT=RR
gained 12 Canadian cents to yield 3.217 percent.
 (Editing by Theodore d'Afflisio)