CANADA FX DEBT-C$ gets boost from oil, equity rally

Thu May 14, 2009 4:38pm EDT
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 * C$ hits session high of 85.58 U.S. cents
 * High oil and equities drive C$'s gain
 * Bond prices boosted by weak U.S. data
 By Frank Pingue
 TORONTO, May 14 (Reuters) - Canada's dollar closed higher
versus the greenback on Thursday as equities rallied and the
price of oil, a key Canadian export, rose and helped renew
appetite for currencies the market perceives as riskier than
the U.S. dollar.
 The Toronto stock market's main S&P/TSX composite index
.GSPTSE recaptured a chunk of the previous session's slide
with a gain of 1.4 percent on Thursday, and the upbeat investor
sentiment spilled over to the Canadian currency.
 "The equity market helped as the TSX put in a strong effort
all day long," said David Bradley, director of foreign exchange
trading at Scotia Capital.
 "But I think equities have rallied far enough from their
lows and I think we are going to see more of a correction,
which is probably going to be negative for the Canadian
 Toronto's key stock index is up about 30 percent from the
five-year low hit in early March, but it has already been
pushed back from the six-month high it reached last week.
 The Canadian dollar closed at C$1.1710 to the U.S. dollar,
or 85.40 U.S. cents, up from C$1.1759 to the U.S. dollar, or
85.04 U.S. cents, at Wednesday's close.
 Late in the session the currency rallied as high as
C$1.1685 to the U.S. dollar, or 85.58 U.S. cents, a move
Bradley said was helped by some stop-loss selling that kicked
in around the C$1.1700 level.
 Another driver behind the currency's move was the rise in
oil prices, which were given a boost by hopes that the global
recession has bottomed. [ID:nN14507104]
 The higher close for the Canadian dollar came after a
choppy week during which it backed off a six-month high it hit
on Monday.
 The next piece of economic data that could have a potential
impact on the currency is the March manufacturing survey due on
Friday. After that, moves could be exaggerated by thin dealings
as traders escape early for the long weekend in Canada.
 Canadian bond prices followed the bigger U.S. Treasury
market to a higher close after U.S. data that showed an
unexpectedly large number of claims for jobless benefits.
 The figures encouraged dealers to snap up secure government
debt, an area that has been rallying of late given recent
selloffs in equities.
 The benchmark two-year Canadian government bond ended up 3
Canadian cents at C$100.30 to yield 1.103 percent, while the
10-year bond rose 8 Canadian cents to C$105.61 to yield 3.096
 The 30-year bond exited the session up 20 Canadian cents at
C$119.55 to yield 3.854 percent.
 Canadian bonds underperformed their U.S. counterparts
across most of the curve. The 30-year bond yield was about 20
basis points below the U.S. 30-year yield, compared with around
23 basis points below on Wednesday.
 (Editing by Peter Galloway)