4 Min Read
* Rises to North American session high of C$1.0011 to US$
* Bank of Canada surveys see upbeat business mood
* Finance minister says C$ rise "relatively orderly"
* Housing starts unexpectedly dipped 1.5 pct in March
* Bonds weaker across curve (Recasts with Bank of Canada survey, Flaherty comments)
By Jennifer Kwan
TORONTO, April 12 (Reuters) - The Canadian dollar approached parity with the U.S. currency on Monday after a pair of Bank of Canada surveys pointed to an upbeat business mood, providing more reasons for the central bank to raise rates midyear.
The currency touched a North American session high of C$1.0011 to the U.S. dollar on Monday, or 99.89 U.S. cents, after the rosy business mood was revealed in the central bank's surveys and after Finance Minister Jim Flaherty repeated that the recent rise by the currency has been "relatively orderly". [ID:nN12187334] [ID:nN12123410]
"Both (surveys) indicate that the economic recovery is very much on its way. The economy is doing pretty well," said Matthew Strauss, senior currency strategist at RBC Capital Markets. He added the surveys support "the notion the Bank of Canada will have to move on interest rates once the conditional commitment expires".
The bank has kept its overnight rate at a historic low of 0.25 percent since April 2009, and pledged to hold it at that level until the end of June, unless inflation threatens to spiral out of control.
At 12:27 p.m. (1627 GMT), the Canadian dollar CAD=D3 was at C$1.0023 to the U.S. dollar, or 99.77 U.S. cents, up from Friday's close of C$1.0040 to the U.S. dollar, or 99.60 U.S. cents.
Flaherty's comments soothed any potential market jitters about the currency's rise, Strauss said.
"(The government) continues to emphasize or imply that it's mostly fundamentals that have driven the Canadian dollar to current levels rather than by speculation, i.e. from their side they seem pretty comfortable with the current levels with the Canadian dollar," he added.
Earlier in the day, the currency weakened as euro zone finance ministers agreed to a rescue package for Greece, sparking a rush to buy the European currency.
The ministers approved a 30 billion euro ($40.5 billion) aid package of loans. For details see [ID:nLDE63A0BO]
The euro rose to its highest level in nearly a month against the U.S. dollar on Monday, though the currency trimmed gains as investors sought more details. [FRX/]
Data on Monday showed Canadian housing starts unexpectedly dipped 1.5 percent in March, but the two previous months were revised higher, suggesting the residential housing sector remains a positive factor in the country's economic recovery. [ID:nN12181613]
The housing figures followed a weaker-than-expected reading for March employment on Friday. [ID:nN09253705]
The currency's rise was also underpinned by news that ConocoPhillips said it will sell its stake in Alberta oil sands consortium Syncrude to China's Sinopec. The news fueled speculation that more deals in the oil sands could follow, and that subsequent merger and acquisition-related currency flows could support the Canadian dollar. [IDnASA007TF]
BOND PRICES SAG
Canadian bond prices were flat to lower across the curve, following U.S. Treasures down as the deal for Greece lessened demand for lower-risk government debt. [US/]
The two-year government bond CA2YT=RR fell 2 Canadian cents to C$99.35 to yield 1.852 percent, while the 10-year bond CA10YT=RR dropped 13 Canadian cents to C$100.64 to yield 3.667 percent. (Additional reporting by Ka Yan Ng; editing by Peter Galloway)