CANADA FX DEBT-C$ firms to US$ parity after Singapore surprise

Thu Oct 14, 2010 9:23am EDT
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   * C$ breaks through parity, touches high of $1.002
 * Bond prices fall as risk appetite returns to market
 By Claire Sibonney
 TORONTO, Oct 14 (Reuters) - Canada's dollar pushed through
parity against the U.S. dollar for the first time since April
on Thursday after Singapore unexpectedly tightened policy by
letting its currency strengthen, pummeling the greenback.
 In the middle of the European morning, the Canadian
currency CAD=D4 touched a high of C$0.9980 against the U.S.
dollar, or $1.002, its strongest level since April 26.
 The U.S. dollar hit a 10-month low against an index of
currencies .DXY and world stocks hit 2-year highs with
investors seeing easier U.S. monetary policy driving a flight
to high-yielding assets. [MKTS/GLOB]
 "It's U.S. dollar weakness that's driving the trend rather
than Canadian factors," said Matthew Strauss, senior currency
strategist at RBC Capital Markets.
 "The Singapore story ... highlighting the divergence in
what's happening in the U.S. compared to what's happening in
Asia and that resulted in some further U.S. selling."
 Singapore widened the trading band for the Singapore dollar
for the first time since just after the 9/11 attacks on the
United States, underlining the depth of its concern about
financial markets. [ID:nSGE69B08J]
 The expectation of quantitative easing by the U.S. central
bank -- essentially creating new money to buy assets -- has
been driving the U.S. dollar lower and riskier assets and
higher yielding currencies, such as Canada's, higher.
 The minutes of the Fed's latest policy-setting session,
released on Tuesday, showed officials had a "sense that (more)
accommodation may be appropriate before long," to help get the
economy back on track. [ID:nN12191658]
 Analysts say the prospect of more U.S. stimulus is only
likely to offer a short-term gain for the Canadian dollar,
which is hugely dependent on commodity prices and exports,
especially to the United States. [ID:nN13265832]
 At 9:01 a.m. (1301 GMT), the Canadian dollar had slipped to
C$1.0016 to the U.S. dollar, or 99.84 U.S. cents.
 Strauss said based on technical analysis, the Canadian
currency would find support and resistance at the C$0.9970 and
C$1.0060 levels.
 Looking forward, he added, "I would not be surprised if we
see a new range forming around parity going forward for the
foreseeable future."
 By the end of the year however, Strauss noted that the
Canadian currency should move back towards C$1.04 because the
"U.S. dollar is extremely oversold at the moment."
 Bond prices fell as broad risk appetite returned and global
equity markets gathered steam, dampening the appeal of
safe-haven government debt.
 Canada's two-year bond CA2YT=RR fell 7 Canadian cents to
yield 1.452 percent, while the 10-year bond CA10YT=RR was
down 10 Canadian cents to yield 2.744 percent.
 (Editing by Jeffrey Hodgson)