CANADA FX DEBT-C$ ekes out gain, helped by strong trade data

Thu Nov 10, 2011 4:26pm EST
 
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 * C$ ends up at C$1.0177 vs US$, or 98.26 U.S. cents
 * Exports helps Canada post surprise trade surplus in Sept
 * Bond prices ease across curve, bond market closed Friday
 (Updates to close, adds details, comments)
 By Claire Sibonney
 TORONTO, Nov 10 (Reuters) - The Canadian dollar edged
higher against the U.S. dollar on Thursday as global markets
stabilized on easing euro zone concerns and domestic trade data
came in much stronger than expected.
 A surge in energy exports helped Canada post a surprise
trade surplus in September, the first since January 2011,
prompting analysts to predict the economy would return to
growth in the third quarter. [ID:nN1E7A90DQ]
 The data gave the currency an early boost but some of the
gains evaporated as investors shifted their focus to choppy
trading in U.S. equities and the euro after a dramatic week
that saw Italy move to the center of Europe's woes.
 "It's been a pretty volatile session," said David Bradley,
director of foreign exchange trading at Scotia Capital.
 "I think the bias is still for a stronger (U.S.) dollar as
we head forward, I think we're going to see more political risk
in Europe which is going to be negative for the euro and should
be positive for dollar/Canada as well."
 Italy moved closer to a national unity government on
Wednesday, following Greece's lead in seeking a respected
veteran European technocrat to pilot painful economic reforms
in an effort to avert a meltdown in euro zone bond markets.
[ID:nL6E7M96E9]
 Italian bond yields also fell back from Wednesday's record
highs of around 7.5 percent but remained elevated, just below
the 7 percent level seen as unsustainable.
 "The market is looking a bit more optimistic and that
optimism has reflected itself in overall offers to the U.S.
dollar with the Canadian dollars attracting some bids," said
Jack Spitz, managing director of foreign exchange at National
Bank Financial.
 The Canadian dollar CAD=D4 ended the North American
session at C$1.0177 against the U.S. dollar, or 98.26 U.S.
cents on Thursday, up from Wednesday's close at C$1.0217 or
97.88 U.S. cents.
 The move higher followed a 1.3 percent drop the day before
on signs Italian borrowing costs reached a breaking point after
Prime Minister Silvio Berlusconi's insistence on elections
instead of an interim government opened the way to prolonged
instability. [ID:nL6E7M93EM]
 Scotia's Bradley said the market was happy to buy Canadian
dollars around the mid-C$1.02 area and sell the currency below
C$1.01.
 He also noted that volume should be light on Friday because
of the Remembrance Day holiday and that any headline risk is
probably going to have an exaggerated impact on the currency.
 The Canadian bond market closed early on Thursday ahead of
the banking holiday. Government bond prices eased, following
U.S. Treasuries lower. [US/]
 The two-year Canadian government bond CA2YT=RR fell 17
Canadian cents lower to yield 0.910 percent, while the 10-year
bond CA10YT=RR dropped 47 Canadian cents to yield 2.140
percent.
 (With additional reporting by Jennifer Kwan; Editing by
Jeffrey Hodgson)