Canadian dollar falls with oil prices, bonds mixed

Wed May 14, 2008 4:49pm EDT
 
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 * Canadian dollar eases against stronger greenback
 * Oil prices slide, reversing currency's early gains
 * Bonds mixed with no key data
 By John McCrank
 TORONTO, May 14 (Reuters) - The Canadian dollar fell
against a stronger U.S. dollar on Wednesday, as oil prices
dropped from their record highs, thwarting the currency's bid
above parity with the greenback.
 Domestic bond prices, with no domestic data to influence
direction, ended mixed.
 The Canadian dollar closed at US$1.0043, valuing a U.S.
dollar at 99.57 Canadian cents, down from C$1.0028 to the U.S.
dollar, or 99.72 U.S. cents, at Tuesday's close.
 "It's still very much in this range, and not a lot has
changed, even though we did try to break through parity," said
Camilla Sutton, currency strategist at Scotia Capital.
 The currency muscled its way above parity early in the
session, hitting a high of US$1.0036, valuing a U.S. dollar at
99.64 Canadian cents.
 Much of the recent strength in the Canadian dollar has been
attributed to higher oil prices, as Canada is a major exporter.
But with the price of U.S. crude CLc1 off its recent record
high of nearly $127 a barrel, the currency lost momentum.
 Adding to the Canadian dollar's weakness was renewed
strength in the U.S. dollar, as softer than expected U.S.
inflation data was not seen altering the U.S. Federal Reserve's
interest rate outlook. See [ID:nN14521634]
 The Canadian dollar was markedly higher against most other
major currencies, however, as the market is taking the view
that what is good for the United States is good for Canada,
said Sutton.
 "When we have the strong U.S. dollar day, we tend to have
very strong Canada days as well in terms of how Canada performs
on the crosses."
 The United States buys over 75 percent of Canadian
exports.
 BONDS MIXED
 Canadian bond prices ended mixed as there was no key data
to influence direction.
 "The markets are looking ahead to manufacturing sales
tomorrow, but I think the real important releases start to come
next week," said Max Clarke, economist at IDEAglobal in New
York.
 Inflation data for April will be released next Wednesday,
with retail sales data for March the due following day.
 The two-year bond fell 5 Canadian cents to C$101.83 to
yield 2.824 percent. The 10-year rose 5 Canadian cents to
C$103.08 to yield 3.596 percent.
 The yield spread between the two- and 10-year bonds was
77.7 basis points, down from 80.1 at the previous close.
 The 30-year bond climbed 34 Canadian cents to C$116.06 for
a yield of 4.054 percent. In the United States, the 30-year
treasury yielded 4.614 percent.
 The three-month when-issued T-bill yielded 2.68 percent,
down from 2.69 percent at the previous close.