CANADA FX DEBT-C$ nudges upper barrier of its recent range

Wed Feb 16, 2011 4:55pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

 * C$ closes at C$0.9849 vs US$, or $1.0153
 * Bond yields drift higher
 (Updates to close, adds analyst comments, details)
 By Claire Sibonney
 TORONTO, Feb 16 (Reuters) - Canada's dollar firmed against
the greenback on Wednesday, helped by rallying equity and oil
prices, but it failed to break out of the tight range in which
it has been locked for weeks.
 Pent-up demand for riskier assets pushed North American
stock indexes to more than 30-month highs, while news that
Iranian warships were en route to Syria through the Suez Canal
rekindled tensions in the Middle East and sparked a surge in
crude prices. [.N] [.TO] [O/R]
 But those factors were not enough to lift the Canadian
dollar from this week's range between C$0.9846 and C$0.9904.
Over a longer term it's been trading in a C$0.9832-C$1.0060
range, often shrugging off equity and commodity price moves
that would normally would have influenced it.
 Mazen Issa, Canada macro strategist at TD Securities, said
he expects the range-bound trade to continue until at least
mid-year, when the U.S. economy starts picking up more steam,
which could prompt the greenback to outperform Canada's
 "In the least ugly contest, Canada looks quite good ... the
fiscal backdrop is relatively glamorous," Issa said.
 "Investors are looking for even a bigger catalyst, at least
a few months from now to see what happens with the U.S.
 Supporting Canada's currency was data that showed
foreigners bought a record amount of Canadian stocks and bonds
in December, led by burgeoning demand for safe-haven debt
instruments. [ID:nN16279164]
 A mixed bag of reports that showed a strong rise in
producer prices and housing starts in the United States and
weak factory sales in Canada did little to sway the currency
one way or the other. [ID:nN16ST1] [id:nN16277118]
 The Canadian dollar ended at C$0.9849 to the U.S. dollar,
or $1.0153, up from Tuesday's North American session close at
C$0.9897 to the U.S. dollar, or $1.0104.
 "Tactically we remain bullish Canada, both against the U.S.
dollar and on the crosses," said Jack Spitz, managing director
of foreign exchange at National Bank Financial.
 The 2011 high so far, C$0.9832, is a key resistance level
for the Canadian dollar, followed by C$0.9780, he said.
 Spitz added, however, that if the price of U.S. oil slips
below $82.40, that could set the stage to sell the
commodity-linked Canadian dollar.
 Although hard pressed to find alternative drivers to
commodity prices and equities, the Canadian dollar has been
sitting relatively well-supported as market players hold to
expectations that the Bank of Canada will boost interest rates
in the first half of the year. [CA/POLL]
 Friday's Canadian inflation data for January could help
firm up expectations on the timing of the Bank of Canada's next
rate hike after it stepped to the sidelines late last year
after three successive rate increases.
 Canadian bond prices eased across the curve, taking a cue
from U.S. Treasuries in choppy price action, although yields
held within recent ranges as nascent fears of rising U.S.
inflation were tempered by a drop in industrial production.
 The theme was consistent with Canadian bond yields backing
up over the past two to three weeks, Issa said.
 The two-year Canadian government bond CA2YT=RR was off 6
Canadian cents to yield 1.953 percent, while the 10-year bond
CA10YT=RR lost 19 Canadian cents to yield 3.502 percent.
 (Additional reporting by Ka Yan Ng; editing by Peter