CANADA FX DEBT-C$ hits 2-mth high on commodity backdrop

Tue Apr 14, 2009 8:09am EDT
 
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 * Firmer oil prices help spark currency's move
 * High equity backdrop also plays a role
 * Bond prices flat as U.S. bank earnings eyed
 By Frank Pingue
 TORONTO, April 14 (Reuters) - The Canadian dollar rose to
its highest level in over two months versus the U.S. currency
on Tuesday, helped by a combination of firmer oil prices and a
rally in overseas equity markets.
 The rise in the domestic currency, while backed mostly by a
solid fundamental background, got a sudden boost as it pierced
a key technical level around C$1.2180.
 With the move higher, the Canadian dollar managed to move
further away from the multi-year low it hit in early March when
falling equities sent investors flocking to the greenback given
its perceived safe haven status.
 "Most base metals are higher. Gold is gold higher, oil is
higher and so all of that is playing into the Canadian dollar's
favor." said Matthew Strauss, senior currency strategist at RBC
Capital Markets.
 "So we have a good fundamental backdrop and there was this
looming support level, and once it was successfully tested it
rallied."
 The Canadian currency rose as high as C$1.2127 to the U.S.
dollar, or 82.46 U.S. cents, which marked its highest level
since Feb. 9.
 By 7:55 a.m. (1155 GMT), the domestic currency retreated
slightly to C$1.2138 to the U.S. dollar, or 82.39 U.S. cents,
but remained up from C$1.2193 to the U.S. dollar, or 82.01 U.S.
cents, at Monday's close.
 With no key domestic data due out on Tuesday, the
currency's moves will likely be dictated by the performance of
equities and moves in the U.S. dollar.
 The next Canadian data that may draw attention is
Thursday's February manufacturing sales report and the consumer
price index data for March due out on Friday.
 The CPI report will be the last major piece of data for the
Bank of Canada to consider ahead of its key interest rate
announcement on April 21.
 The central bank cut its key rate to a historic low of 0.5
percent in March and has signaled it may take extra steps to
pump money into a system that remains short of credit.
 BONDS PRICES TILT HIGHER
 Canadian bond prices were a touch higher across the curve,
mirroring a move by the bigger U.S. Treasury market, as some
upbeat U.S. banking news left dealers with little interest in
more secure assets like government debt.
 After the markets closed on Monday, Goldman Sachs (GS.N: Quote)
delivered a higher-than-expected first-quarter profit, seen by
some experts as evidence it managed to sidestep the worst of
the financial crisis. [ID:nN13387020]
 The two-year bond was up 1 Canadian cent at C$100.31 to
yield 1.102 percent, while the 10-year bond rose 12 Canadian
cents to C$107.17 to yield 2.925 percent.
 The 30-year bond was up 10 Canadian cents at C$123.75 to
yield 3.643 percent. In the United States, the 30-year treasury
yielded 3.705 percent.
 (Editing by Chizu Nomiyama)