CANADA FX DEBT-C$ ticks up, has first weekly gain in 5 weeks

Fri Jul 17, 2009 4:53pm EDT
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 * C$ rises to finish at C$1.1161 to the U.S. dollar
 * Up 4.4 percent for the week
 * Shrugs off June's negative inflation rate
 * Bond prices lower
 (Adds details, quotes)
 By Jennifer Kwan
 TORONTO, July 17 (Reuters) - The Canadian dollar climbed a
bit against the greenback in muted trade on Friday, logging its
first weekly gain in five weeks as optimism about economic
recovery spurred investors to greater risk.
 "The story is that the currency has had one of its best
weeks in some time, hoisted by improved risk appetite and
rising energy prices," said Sal Guatieri, senior economist at
BMO Capital Markets.
 Strength on North American stock markets through the week
set a positive tone for the currency, inspiring the market to
move away from the safe-haven U.S. dollar. Rising stocks are
typically seen as a sign investors are willing to take on
greater risk.
 "Risk appetite was whetted by the string of better than
expected earnings reports from the U.S., especially in the
banking sector," Guatieri said.
 Another factor helping the Canadian dollar on Friday was a
2.5 percent runup in the price oil CLc1 to $63.56 a barrel,
boosted in part by reassuring U.S. housing data.
  The Canadian dollar barely budged after data showed the
annual inflation rate turned negative in June for the first
time since November 1994. The figures were right in line with
forecasts in a Reuters survey of analysts. [ID:nN17202629]
 "It was really quiet today because the inflation numbers
came out right as expected, across the board. That for the most
part set the tone for a fairly uneventful trading day," said
George Davis, chief technical strategist at RBC Capital
 The Canadian dollar finished at C$1.1161 to the U.S.
dollar, or 89.60 U.S. cents, up from C$1.1172 to the U.S.
dollar, or 89.51 U.S. cents, at Thursday's close.
 The Canadian dollar was up 4.4 percent for the week, the
first weekly gain in five weeks.
 "We've seen a shift in sentiment. It's become more positive
again and I think the market in general has been more open to
taking on additional levels of risk," Davis said.
 "That more positive sentiment has been the main factor that
has kicked the Canadian dollar higher this week."
 Next week, traders will be eyeing Tuesday's Bank of Canada
interest rate announcement and the bank's Monetary Policy
Report on Thursday, when a forecast of a slightly less dismal
economy could surface. [ID:nN15348944]
 Canadian bond prices were lower, following U.S. Treasury
prices, which fell on Friday after the government said U.S.
housing starts rose in June. [ID:nN17434331]
 "We're lower on the long end because of stronger than
expected U.S. housing starts report," Guatieri said.
 "It's a sign that the U.S. housing market is stabilizing,
if not slowly recovering, and adds weight to the view that the
U.S. economy will emerge from recession later this year."
 The two-year Canada bond was down 1 Canadian cent at
C$100.07 to yield 1.211 percent, while the 10-year bond fell 53
Canadian cents to C$102.12 to yield 3.493 percent.
 The 30-year bond was down 95 Canadian cents to C$116.40 to
yield 4.016 percent. In the United States, the 30-year Treasury
yielded 4.5460 percent.
 Canadian bonds mostly outperformed U.S. Treasuries across
the curve. The Canadian 30-year bond was 53 basis points below
the U.S. 30-year yield, compared with about 48 basis points
below on Thursday.
 (Reporting by Jennifer Kwan; editing by Peter Galloway)