Canadian dollar rises on manufacturing, bonds up

Fri Aug 15, 2008 4:38pm EDT
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By Lynne Olver

TORONTO (Reuters) - Stronger-than-expected manufacturing figures helped lift the Canadian dollar against the U.S. dollar on Friday, while bond prices took their cue from a rising U.S. Treasury market.

The Canadian dollar closed at C$1.0590 to the U.S. dollar, or 94.43 U.S. cents, up from C$1.0633 to the U.S. dollar, or 94.05 U.S. cents, at Thursday's close.

The U.S. dollar rallied against many major currencies overnight, including the Canadian dollar.

But that changed when morning data showed Canadian manufacturing sales rose by 2.1 percent in June from May -- more than double the market's expectation.

The currency jumped to C$1.0585 to the U.S. dollar, or 94.47 U.S. cents, immediately after the data release, and despite a midday pullback, it wound up hanging on to most of those gains.

"The data seems to have had a pretty profound impact on the Canadian dollar, the currency is really rallying in stark contrast to the trend we've seen over the last few weeks," said Eric Lascelles, economics and rates strategist at TD Securities.

"I have to say I'm a little bit surprised that it's managed to completely outweigh the softness in commodity prices, but it simply seems that some days commodity prices don't win," Lascelles added.

The strength in manufacturing, which directly accounts for about one-fifth of all economic activity, topped expectations of a 1 percent rise in sales, but some economists sounded a cautionary note.   Continued...