December 21, 2007 / 9:46 PM / 10 years ago

Canadian dollar rises on oil, data. Bonds fall

3 Min Read

TORONTO (Reuters) - Robust commodity prices and stronger-than-expected economic data combined to propel the Canadian dollar higher against the U.S. dollar on Friday.

Canadian bond prices fell on the solid data, and as a rally in the equities markets eroded a safe haven bid for government debt.

The Canadian dollar closed at US$1.0074, valuing each U.S. dollar at 99.27 Canadian cents, up from US$1.0001, or 99.99 Canadian cents to the U.S. dollar, at Thursday's close.

The Canadian dollar is up more than 2 percent for the week, and nearly 16 percent so far this year.

"Canada has been one of the outperformers year-to-date, and it is still, despite some of the wobbles we've had as of late, one of the top performing currencies," said Shaun Osbourne, chief currency strategist at TD Securities.

To find a currency that's done better against the greenback on the year, Osbourne said you would have to look outside the G10 currencies, and to developing nations like Brazil and Turkey.

Lofty crude prices, played a large roll in the Canadian dollar's gains this year. Canada is a major oil producer and exporter.

U.S. crude oil prices jumped more than 2 percent on Friday, helping vault the Canadian currency well past the parity mark with the greenback.

Solid economic data also helped underpin the favorable sentiment towards the Canadian dollar.

Statistics Canada said the country's economy grew by 0.2 percent in October from September as the manufacturing and wholesale trade sectors made gains.

Market analysts had, on average, forecast the economy would grow by 0.1 percent.

And retail sales edged up by 0.1 percent in October from September, beating the average call by market analysts for a 0.2 percent decline.

Bonds Lower

Bond prices fell on the solid data and as a rally in the North American equities markets detracted from the recent safe-haven bid in government debt.

Light pre-holiday trading may have exaggerated the moves that were made, analysts observed.

The two-year bond fell 12 Canadian cents to C$100.76 to yield 3.838 percent. The 10-year bond dipped 39 Canadian cents to C$99.61 to yield 4.049 percent.

The yield spread between the two-year and 10-year bond was 22.3 basis points, up from 21.2 basis points at the previous close.

The 30-year bond slid 80 Canadian cents to C$114.71 to yield 4.131 percent. In the United States, the 30-year treasury yielded 4.527 percent.

The three-month when-issued T-bill yielded 3.88 percent, up from 3.87 percent at the previous close.

Editing by Peter Galloway

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