CANADA FX DEBT-C$ backs off 4-wk high but finishes higher

Mon Jun 14, 2010 4:46pm EDT
 
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 * C$ ends slightly higher at 96.85 U.S. cents
 * Bonds sag as world recovery hopes rise
 (Adds details)
 By Ka Yan Ng
 TORONTO, June 14 (Reuters) - The Canadian dollar backed off
a four-week high but finished firmer against the U.S. currency
on Monday, aided by stronger energy prices.
 Early support took the currency to C$1.0225 to the U.S.
dollar, or 97.80 U.S. cents, a high last reached on May 14, as
oil prices rose to just shy of $76 a barrel, while natural gas
soared more than 5 percent.  [O/R]
 "The Canadian dollar continues to trade with some
beneficial influence off the back of stronger energy pricing,
particularly natural gas," said Jack Spitz, managing director
of foreign exchange at National Bank Financial.
 The currency pared gains halfway through the session, along
with the euro, after Moody's cut Greece's credit rating to junk
status and said the country faced substantial risks. The
downgrade had been anticipated by market players, and that
cushioned the euro's retreat. [ID:nWNA3381].
 "All things being equal, the euro's ability to sustain news
like this actually speaks quite well and could contribute to
more euro gains," Spitz said. "That in itself could contribute
to better offers in dollar/Canada."
 The Canadian dollar finished at C$1.0325 to the U.S.
dollar, or 96.85 U.S. cents, up from C$1.0338 to the U.S.
dollar, or 96.73 U.S. cents, at Friday's close.
 Some strong data has underscored recent optimism about the
world economic recovery: Euro zone industrial output in April
surged year-on-year more than in any month in almost two
decades, figures on Monday showed, while Chinese export data
last week signaled robust global demand. [ID:nLDE65D0YC]
 Positive sentiment also flowed from comments by St. Louis
Federal Reserve Bank President James Bullard, who said the
global recovery under way was unlikely to be thrown off course
by events in Europe or by the unlikely bursting of an asset
bubble in China.  [ID:nTOE65D04O]
 BONDS FALL HARD
 Canadian bond prices fell as dimming worries about the
world's economic health pushed investors out of safe haven
assets such as government debt.
 "There's been no new bad news," said Sheldon Dong, fixed
income analyst at TD Waterhouse Private Investment. "That's why
the risk-on trade is coming back on."
 Greece's downgrade, although expected by market players,
was felt most in equity markets, which sold off from session
highs. Toronto's main index finished little changed. [.TO]
 The two-year government bond CA2YT=RR was off 7 Canadian
cents to yield 1.818 percent, while the 10-year bond
CA10YT=RR sagged 30 Canadian cents to yield 3.440 percent.
 Canadian bonds underperformed U.S. issues across most of
the yield curve. The 10-year Canadian yield was 17.1 basis
points above its U.S. counterpart, down from about 17.6 basis
points on Friday.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)