Canadian dollar gets M&A boost, bonds rally

Mon Jul 14, 2008 5:05pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar rose 0.4 percent against a resurgent U.S. dollar on Monday, mainly due to merger-related interest in Canada's energy sector.

Canadian bond prices, with no domestic data to consider, rallied along with the U.S. Treasury market due to jitters about the state of the U.S. financial system.

The Canadian currency closed at C$1.0052 to the U.S. dollar, or 99.48 U.S. cents, up from C$1.0094 to the U.S. dollar, or 99.07 U.S. cents, at Friday's close.

The currency rose early in the session after Royal Dutch Shell RDSa.L said it would buy Alberta-based Duvernay Oil Corp DDV.TO for around C$5.9 billion.

"Even though we had the U.S. dollar bouncing back from its lows earlier in the day, it didn't really have much traction against the Canadian dollar," said David Watt, senior currency strategist at RBC Capital Markets.

Looking forward, the main events of the week will be the Bank of Canada's interest rate announcement on Tuesday and its updated monetary policy report on Thursday.

A Reuters poll taken Friday showed Canada's primary securities dealers expect the central bank to leave its key lending rate steady at 3.00 percent on Tuesday. That means the majority of attention will be on its accompanying statement, from which market players will try to glean some insight into its future moves.

"The wild card is whether they will make any statements about terms of trade, or those kinds of issues, which would be CAD positive," Watt said.   Continued...

<p>A Canadian one dollar coin, also know as a loonie, is shown in Montreal, April 28, 2006. REUTERS/Shaun Best</p>