CANADA FX DEBT-C$ sags as oil dips, greenback firms

Fri Jan 15, 2010 4:32pm EST
 
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 * Ends at C$1.0294 per US$, or 97.14 U.S. cents
 * C$ ticks 0.14 percent higher for the week
 * Lower commodity prices pressure C$
 * Bond prices higher
 (Updates to close, adds quotes)
 By Jennifer Kwan
 TORONTO, Jan 15 (Reuters) - The Canadian dollar retreated
against the U.S. currency on Friday, pressured by lower
commodity prices, as the greenback gained broadly on U.S.
economic data.
 Oil, a key Canadian export, slipped to around $78 a barrel
on a stronger U.S. dollar, high inventories and expectations
for reduced heating demand in the United States. Gold was also
weaker. [O/R] [GOL/]
 The U.S. dollar rose across the board on U.S. reports
indicating a rise in manufacturing and stable consumer price
inflation, while the euro remained pressured by concerns about
the Greek economy. [FRX/]
 Despite a slightly bearish picture for the Canadian dollar,
the commodity-linked currency is still seen as a favorite among
investors, currency watchers said.
 "We're trading in an inside range today and I don't think
that means anything significant in the grander scheme of
things. It's just consolidation. We think the trend is still
lower for the U.S. dollar," said Shaun Osborne, chief currency
strategist at TD Securities.
 The Canadian dollar finished at C$1.0294 to the U.S.
dollar, or 97.14 U.S. cents, down from Thursday's finish at
C$1.0234 to the U.S. dollar, or 97.71 U.S. cents. It edged 0.14
percent higher for the week.
 "You've got two divergent forces going on here: you've got
the euro selling off, which is causing the U.S. dollar to be
bid, and technical levels that have been broken in
dollar/Canada that argue for a higher Canadian dollar," said
Firas Askari, head of foreign exchange trading at BMO Capital
Markets.
 On Thursday, the Canadian dollar shot up to C$1.0225 to the
U.S. dollar, or 97.80 U.S. cents, its highest intraday level
since Oct. 15.
 Many traders are now watching the C$1.0207 level. If the
currency breaks through this it would be at its highest point
since July 2008.
 The key event next week will be the Bank of Canada's policy
announcement on Tuesday. Most of Canada's primary securities
dealers forecast the bank will maintain its conditional promise
to keep its key interest rate at the near-zero level through
the second quarter. [CA/POLL]
 "The market is going to be quite sensitive to any sort of
clues that might emerge on rate prospects. But we don't think
there's going to be any real pressure on the bank to tighten
rates until late this year," said TD's Osborne.
 BONDS CLIMB
 Canadian bond prices were higher and moved in sync with
U.S. Treasury issues, which climbed on a tame U.S. inflation
report, short-covering after a well-bid 30-year auction on
Thursday, and concerns about sovereign risk in Europe. [US/]
 "We followed the U.S. The inflation numbers were somewhat
benign and stocks are down," said Roger Quick, director of
fixed-income research at Scotia Capital.
 The two-year Canada bond CA2YT=RR edged 7 Canadian cents
higher to C$99.94 to yield 1.283 percent, while the 30-year
bond CA30YT=RR climbed 65 Canadian cents to C$115.50 to yield
4.057 percent.
 Canadian bonds mostly underperformed U.S. issues, with the
30-year yield 52 basis points below its U.S. counterpart, from
from 54 basis points in the previous session.
 (Editing by Rob Wilson)