CANADA FX DEBT-C$ ends lower, but above parity for second day

Wed Apr 21, 2010 5:17pm EDT
 
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 * Ends at C$0.9992 to the U.S. dollar, or $1.0008
 * C$ touches near 23 month-high of C$0.9931 or $1.0069
 * Bond prices mostly weaker on rate hike expectations
 (Updates to close, adds details, quote)
 By Jennifer Kwan
 TORONTO, April 21 (Reuters) - Canada's dollar closed weaker
on Wednesday but held above parity against the greenback for a
second straight session, supported by the lingering impact of
the Bank of Canada's signal it could raise rates soon.
 The Canadian currency CAD=D4 finished at C$0.9992 to the
U.S. dollar, or $1.0008, a sliver lower than Tuesday's close at
C$0.9988 to the U.S. dollar, or $1.0012.
 "By and large, the market continues to see Canada as a very
strong viable alternative from a global perspective," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial.
 The Canadian currency CAD=D4 earlier in the day rose as
high as C$0.9931 to the U.S. dollar, or $1.0069 U.S. cents, its
strongest level since June 2008.
 The Canadian dollar jumped more than 1 U.S. cent on Tuesday
after the central bank became the first in the Group of Seven
countries to hint it may raise interest rates, possibly as
early as June 1. [ID:nN20257669] [ID:nN20103790]
 Currencies usually strengthen as interest rates rise
because higher rates tend to attract capital flows.
 The currency managed to hold above parity at the close of
the North American session on Wednesday even as stock markets
notched a lackluster performance and oil prices, a key Canadian
export, were slightly weaker. [O/R]
 Some market watchers said the technical outlook for the
currency was still bullish. Technical analysis tries to
identify price patterns and trends in financial instruments.
 The Canadian dollar traded above its 14-day, 50-day,
100-day and 200-day simple moving averages, indicating the
currency had no key resistance levels on that measure.
 And the 20-day lower Bollinger band, a technical analysis
tool that plots one standard deviation above and below the
moving average of closing prices, was at C$0.9905, suggesting
the Canadian dollar could appreciate further.
 But investor focus on Thursday will also be on the Bank of
Canada's Monetary Policy Report.
 BOND PRICES FALL, LONG END UP
 Canadian bond prices extended their fall after the central
bank's rate announcement in the previous session and stood out
against other markets, said Doug Porter, deputy chief
economist, at BMO Capital Markets.
 "Bonds continue to selloff in the wake of yesterday's news.
If anything, the market priced in a little bit more Bank of
Canada tightening. It's the sober second thought," said
Porter.
 The two-year government bond CA2YT=RR was down 4 Canadian
cents at C$99.00 to yield 2.050 percent, while the 10-year bond
CA10YT=RR fell 9 Canadian cents to trade at C$100.22 and
yield 3.721 percent.
 The 30-year bond CA30YT=RR rose 12 Canadian cents to
C$115.20 to yield 4.069, following flattening moves in U.S.
Treasuries.
 Canadian government bonds underperformed U.S. issues, with
the two-year yield 105 basis points above its U.S. counterpart,
compared with around 99 basis points the previous session.
 (With additional reporting by Ka Yan Ng and Claire Sibonney in
Toronto and Nick Olivari in New York; Editing by Jeffrey
Hodgson)